U.S. Bailout Passes

Congress has passed the $700 billion U.S. rescue package, just four days after voting down the original version. 

Now all eyes have turned to the market's reaction.  Will this free up North America's lock-tight credit markets?  Who knows.  It may take a while for the U.S. treasury to buy up all the rotten assets plaguing American banks.  In the short-term, it's possible that lenders may still be unwilling to loosen up credit to any great extent.

On one positive note, CEP says LIBOR (the international overnight bank-to-bank lending rate) has improved dramatically.

Here is the rest of the market's reaction following this historic vote:

• TSX: +1.19%
• Dow Jones Industrials: +0.45%
• 5-year Canadian bond yield:  -0.07% to 2.96%

Comments

[Brian Poncelet,CFP]

MT,

The 700 billion dollar bailout is really 850 billion dollars. Why? Since votes were needed to pass the bailout, more money was added to make it pass. More tax-cuts, etc. In the end the tax payers will feel the pain.

regards,

Brian

[Canadian Mortgage]

Hi Brian, I think you're right that the headline $700 billion pricetag will likely be a "bit" shy. I've heard estimates well over a trillion dollars when all is considered. Of course, proponents feel the U.S. government will get it all back. Hopefully they're right. - Rob