Congress set to continue talks over government proposal to tackle financial crisis.
“They were expecting the bailout plan to have been voted through by now and a lot could happen. It could be botched between now and then.”
‘No happy day’
Terrrett said that as banks were still not lending to each other – meaning the credit markets were not unfreezing – and the widening international crisis, with banks being rescued on Monday in Germany, Iceland, the UK and Belgium and with New Zealand going into recession, meant concern was still high.
“This was all supposed to be a much happier day than it is turning out to be,” he said.
The Dow Jones Industrial Average had slid by 234 points, or 2.1 per cent ,to 10,908 and the Nasdaq had fallen by 80 points, or 3.67 per cent to 2,103.11 at 1450 GMT.
Britain’s FTSE 100 had tumbled 5.3 per cent at close amid the swathe of efforts around Europe to try and rescue troubled banks.
Asian markets initially rose on Monday but soon fell by as much as two per cent.
Earlier President George Bush urged the US congress to pass the bail-out plan that it is hoped will provide a stimulus to the country’s troubled financial sector.
Announcing the deal, the US president acknowledged that “negotiations were sometimes difficult”.
He said: “I know many Americans are concerned by the cost of the bill,” he said, an acknowledgment of the fears expressed by many US citizens that those within the banking system seen as responsible for the crisis would avoid being penalised.”
The original bill, proposed by the Bush administration, had been stalled by legislators who felt there was too little oversight for what would be a huge transfer of taxpayers money.
Bush said that the revised bill had greater safeguards, stronger oversight and “ensures failed executives do not receive a windfall from your tax dollars”.
Asked if the compromise bill would make it through congress, Chris Dodd, a Democratic senator, replied: “We hope so.”
The senator – the chairman of the Banking Committee – warned that the bill was not a panacea for all the problems that have bedeviled the US financial markets.
But he said that failure to act would have spread the contagion of frozen credit markets even further.
“This is not just about Wall Street,” Dodd said. It is “potentially going to hurt other people across the country,” he said.
With many Americans struggling to save their homes from foreclosure, lawmakers were bracing for a grassroots backlash against a bailout for Wall Street banks, which contributed to the US housing bubble with reckless lending.
The revised deal includes safeguards for taxpayers and provisions that would allow the government to claw back funds if house prices recover and its holdings of bad debt gain value.
The proposed legislation would disburse the $700bn in stages.
The first $250bn would be issued when the legislation is enacted, while another $100bn could be spent if the president decided it was needed.
The remaining $350bn would be subject to congressional review.
Institutions selling assets under the plan would issue stock warrants to the government, a step intended to give taxpayers a chance to profit if markets recover.
If the bill goes through it will be the biggest intervention by the government in markets since the Great Depression of the late 1920s.