US lawmakers reached basic agreement on a massive financial bailout plan, lifting world stock markets, sending the dollar up and breathing life into troubled money markets. The breakthrough on a $700 billion rescue plan was sealed ahead of a 4 pm (2000 GMT) emergency meeting with US President George W. Bush and the two men battling to succeed him, Democrat Barack Obama and Republican John McCain.
Senator Christopher Dodd, chairman of the US Senate Banking Committee, said House of Representatives and Senate negotiators had reached "fundamental agreement" on a set of principles guiding a bailout bill. Republican Senator Robert Bennett of Utah, following a closed-door meeting of lawmakers negotiating the bailout package, said, "We now expect that we will have a plan that can pass the House, pass the Senate and be signed by the president."
Lawmakers declined to provide details of the plan, but it is expected to include limits on executive pay and strong oversight provisions. News of an agreement stabilised beleaguered money markets that were frozen by a reluctance by banks to lend. The rate on one-month US Treasury bills shot higher as traders unwound safe-haven trades. Still, officials from France to China voiced alarm.
"A crisis of confidence without precedent is shaking the global economy," French President Nicolas Sarkozy said in a speech. "A certain idea of globalisation is drawing to a close with the end of a financial capitalism that had imposed its logic on the whole economy and contributed to perverting it."
The swirl of meetings in Washington followed fresh turbulence in the world economy. The crisis reverberated in Amsterdam and Brussels, where Fortis NV, the Belgian-Dutch financial services group, denied a rumour that the Dutch Central Bank had asked a Fortis rival to support the company's liquidity position. Fortis shares sank as much as 21 percent to 14-year lows.
In Asia, hundreds of people lined up outside the Hong Kong branches of the Bank of East Asia Ltd, some sleeping there overnight, to withdraw their savings amid fears the bank could be Asia's first victim of the year-old credit crisis.
More than 400 customers crammed into the bank's only branch in Singapore, despite assurances from the city-state's monetary authority that the bank was sound and news that billionaire Li Ka-shing had bought stock in the bank in a vote of confidence.
China's banking regulator sought to reassure jittery financial markets, denying a report that it had told local banks to stop lending to US banks and stressing that foreign bank operations in China were healthy. Signs of a breakthrough on the rescue package, which aims to stave off a widespread financial meltdown, gave beleaguered US stocks and the US dollar a boost.
The Bush administration hopes to restore liquidity to financial markets and revive the foundering US economy by spending $700 billion to buy up toxic mortgage-related securities and other sour assets held by financial firms.
But just weeks before Americans go to the polls to elect a new president, critics are concerned the plan will let freewheeling bankers off too lightly, and doubts have surfaced over whether it can solve the wider crisis.
Lawmakers are seeking several concessions from the White House, including a curb on the pay of executives whose companies seek government help, and a provision that would give taxpayers an equity stake in some of the companies so the government can profit if they prosper in the future.
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