The Bush administration widened the scope of its $700 billion plan to avert a financial meltdown by including assets other than mortgage-related securities.
The US Treasury submitted revised guidance to Congress on its plan late on Monday as lawmakers and lobbyists push their own agendas. The department also adjusted its plan to insure money-market funds to limit protection to balances as of Sept 19, after complaints from bank lobbyists.
Officials made the changes two days after unveiling plans for an unprecedented intervention in financial markets. The change to potentially allow purchases of instruments such as car loans, credit-card debt and other devalued assets may force an increase in the size of the package as the legislation proceeds through Congress. "The Treasury's thinking is to make it as big and wide as possible so they have the flexibility to act if need be," said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors, which manages about $108 billion. "There have been losses on a whole range of US debts and as the economy deteriorates in response to the housing slump those losses could escalate."
Treasury officials now propose buying what they term troubled assets, without specifying the type, according to a document obtained by Bloomberg News and confirmed by a congressional aide.
"The costs of the bailout will be significantly higher than originally considered or acknowledged," said Josh Rosner, an analyst with independent research firm Graham Fisher & Co in New York. "How, given these changes, can the administration and Federal Reserve believe they are being forthright in their unrevised expectation of future losses?"Treasuries rose on speculation the Fed will cut interest rates to support the rescue plan. Two-year note yields declined 8 basis points to 2.11 percent as of 3:20 pm in Tokyo.
Planned limitations
Separately, the Treasury said in a statement late on Monday it would limit its $50 billion plan for insuring money-market funds to those held by investors as of Sept 19, excluding any subsequent contributions.
The American Bankers' Association, which had expressed concern about the plan last week, praised the move, saying it would eliminate an incentive for savers to shift out of bank accounts into money-market funds.
The Treasury put no limit on the money-market fund insurance, while the Federal Deposit Insurance Corp protects bank deposits up to $100,000.
"If all money market mutual funds had been included with the government guarantee moving forward, this proposal would have threatened to take money out of local FDIC-insured banks" Edward Yingling, president of the ABA in Washington, said in a statement.
Source:China Daily/Agencies
|
Comment
Tell A Friend
Print Format
Save Article