US bail-out plan provokes doubts

US bail-out plan provokes doubts
Wall Street traders
Markets have seen huge volatility recently

Doubts over the speed at which the US financial bail-out plan can be introduced have emerged from both Democrats and Republicans.

Contentious issues include limiting compensation for bosses of rescued firms and wider help for Americans who could lose their homes.

Lawmakers from both sides say they need more time for debate, but a leading Democrat said progress was being made.

The White House says Congress must back the plan to prevent more economic harm.

President George W Bush said the world was watching to see if "we can act quickly to shore up our markets".

Details of the $700bn (£382bn) package are still being worked out.

Meetings took place over the weekend between Federal Reserve head Ben Bernanke, US Treasury Secretary Henry Paulson and members of Congress to try to seek consensus on the plan.

However uncertainty over how the programme will work caused the Dow Jones share index to fall by more than 370 points, or 3.27%, wiping out the gains made during Friday's rally.

'Unreasonable' expectation

Lawmakers from both sides have raised a number of concerns with the bail-out plan.

Democratic Congressman Barney Frank, chairman of the House Financial Services Committee, said Democrats would want certain changes, such as guaranteeing that the pay for bosses of the firms being bailed out was limited.


Never before in the history of our nation has so much power and money been concentrated in the hands of one person
John McCain
Republican presidential candidate

"The private sector got us into this mess," said Mr Frank. "The government has to get us out of it. We do want to do it carefully."

Democratic presidential candidate Barack Obama joined those Congressional Democrats asking for limits to be placed on personal benefits given to bankers, whose unwise loans contributed to the crisis.

He also called for a wider bail-out that helps homeowners at risk of losing their homes as well as those on Wall Street.

His Republican opponent, John McCain, also raised doubts about the mega bail-out, calling for greater supervision of US Treasury Secretary Henry Paulson, the architect of the plan, who will decide how the $700bn is spent.

"Never before in the history of our nation has so much power and money been concentrated in the hands of one person. This arrangement makes me deeply uncomfortable," Mr McCain said.

While neither candidate can hold up the plan themselves, they can create the space for its opponents in Congress to delay it, BBC North America editor Justin Webb notes.

In a statement, Mr Bush said that failure to act would have "broad consequences". White House officials have emphasised that they expect "strong, transparent oversight" of the rescue plan.

After a day of talks, Democratic Congressman Barney Frank - who chairs the Financial Services Committee - told the Associated Press news agency that "a great deal of progress" had been made.

Changing landscape

The Group of Seven (G7) most wealthy nations said it welcomed the US move and reaffirmed its strong commitment to "protect the integrity of the international financial system".

"We pledge to enhance international cooperation to address ongoing challenges in the global economy and world markets," said the G7.

It added it would do whatever was necessary to ensure stability in the international financial system.

The financial sector has seen huge upheaval in recent days, with Lehman Brothers folding and Merrill Lynch being bought by Bank of America.

Morgan Stanley and Goldman Sachs - for decades independent investment banking firms - requested to change their status that will see them regulated by the Fed.

The move, which means they will expand into the commercial banking sector, arguably marks an end of an era on Wall Street.