Global shock as $700 billion bail out is rejected

Global shock as $700 billion bail out is rejected



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The world reacted with shock this morning as the US government’s $700billion plan to buy out toxic assets of banks was defeated by a vote of 228-205. The unexpected rejection of the plan has resulted in a downturn of the global stock markets, that looks set to become even worse if an agreement is not reached soon.
 
The response this morning has been a steady decline of Europe’s financial indexes. The UK’s FTSE 100 was down by 0.9% (43 points) to 4,775, Germany’s Dax, down by 1.7% (100 points) to 5,707 and France’s Cac 40, down by 1.3% (52 points). In addition to this British banking shares have plummeted. HBOS shares are down 12%, Royal Bank of Scotland by 11% and Lloyds TSB by 9%.
 
Not only in Europe has the vote had massive repercussions, however; the effect of the decision has spanned the globe, with Asian stocks showing massive declines as trading opened this morning. In Russia all trading has been suspended until an agreement is reached, and on Wall Street in the Dow Jones index has seen the worst drop in history.
 
Prime Minister, Gordan Brown, has said that he is “very disappointed” with the US vote, whilst David Cameron stated that it was “a deal urgently needed to stabilise markets worldwide”.
 
President Bush has vowed to bring a new deal to Congress later this week in order to bring the global economic turmoil under control. It is thought that Congress will reconvene on Thursday, meaning that another vote is unlikely to happen until next week.
 
It has been suggested that the main reason for the rejection was opposition from House Republicans, despite the plan being backed by both George Bush and John McCain. Meanwhile, others expressed discontent over the fact that ordinary taxpayers would be expected to pay for corporate greed.
 
As the controversy continues to rage, we can only wait, whilst a global economical tempest looms on the horizon.

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