US leaders pledge to make bailout work

Political and financial leaders in the United States tonight vowed to act “as expeditiously as possible” to put the provisions of the economic rescue package into action.

But there is still no estimate as to when the American public can expect to see any benefit from the Bill, which will cost taxpayers up to 700bn (€506.5bn).

President George Bush signed the Emergency Economic Stabilisation Act of 2008 into law today and said “careful analysis and deliberation” were needed to devise a way to enact the Bill’s provisions.

Mr Bush said the legislation “addresses this problem head-on by providing a variety of new tools to the government, such as allowing us to purchase some of the troubled assets and creating a new government insurance programme that will guarantee the value of others”.

But he added: “Americans should also expect it will take some time for this legislation to have its full impact on our economy”.

“This will be done as expeditiously as possible but it cannot be accomplished overnight,” he said.

He added that it will take “more time and determined effort to get through this difficult period”.

“This will be done as expeditiously as possible but it cannot be accomplished overnight,” Mr Bush said.

Treasury Secretary Hank Paulson pledged quick action to get the programme up and running.

Federal Reserve Chairman Ben Bernanke said the Fed, the US central bank, would work closely with the Treasury to put the Bill’s provisions into effect.

In the last major government intervention in financial markets, the government took over assets of over a thousand savings and loan associations that had gone broke in the 1980s.

That clean-up took six years.

The president signed the Bill into law at 2.48pm ET (7.48pm Irish time) just over an hour after it was passed by the House of Representatives.

The Senate stepped in mid-week and added more than US$100bn (€72.4bn) of so-called “sweeteners” to the proposals, piling pressure on the House, which rejected the Bill on Monday, to follow suit.

A former official at the Federal Reserve, the US central bank, told the political website Politico.com last week that the US would face “complete financial Armageddon and a great depression” if the Bill could not be passed.

But other experts warned that such talk did not “reflect clear thinking” and added that while the US was facing a crisis, the troubles did not yet represent a disaster.

The rescue plan casts Washington’s long shadow over Wall Street with the federal government taking over huge amounts of devalued assets from beleaguered financial firms in exchange for more oversight.

It authorises the Treasury to borrow up to $700bn (€506.5bn) to buy bad mortgages, securities and other assets that are creating instability in the nation’s financial system.

It also places restrictions on the compensation of executives at companies that sell mortgage assets to the Treasury.

An oversight board, including the chairman of the US central bank the Federal Reserve, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary, will now be created.

The long list of so-called “sweeteners” added by the Senate, which specialises in high-stakes legislating-by-enticement, was designed to attract votes from various constituencies which opposed the original Bill.

These amendments included $100bn (€72.4bn) in tax breaks for businesses and the middle class and raised the cap on federal deposit insurance from $100,000 (€72,422) to $250,000 (181,044).

But the deal also included extra benefit or unassociated items, including Nascar, rum and wooden arrows for children.

Max King, an investment strategist at Investec Asset Management in London told the New York Times that Americans realised the Bill was not “a magic bullet”.

“The sensible people say the package is necessary but not sufficient,” he said.

“It may have short-term beneficial effects but raises more questions than it answers. It’s not the solution. The solution is a long drawn-out process.”