Bail-out debate: For and against
As the debate rages about the US $700bn (£379bn) financial bail-out plan, BBC News looks at the arguments for and against this rescue package.
FOR THE DEAL
- Global financial stability: the plan is aimed at bringing calm to an extremely volatile global financial system. The world's richest nations, the Group of Seven (G7) say the package will, "protect the integrity of the international financial system".
- Investor wellbeing: Investors worldwide need a shot of confidence. As billionaire investor Warren Buffett put it: the plan was "absolutely necessary" to help pull the financial system out of an "economic Pearl Harbour".
- Global slowdown: All sides agree that we want to avoid recession in the world's biggest economy and the knock-on effect that would have for countries that rely on America for trade.
- Job security: Safeguarding jobs across the economy and preventing bankruptcies that "threaten American families' financial well-being" according to US Treasury Secretary Henry Paulson.
- Credit freeze: Keeping funds flowing through the money markets so that financial institutions are happy to lend to each other, to businesses and to consumers is vital for any functioning economy.
- Toxic profits: The $700bn cost of mopping up banks' toxic debts may seem a high price, but when authorities eventually sell these assets in the future, their value may have risen enough to make a profit.
AGAINST THE DEAL
- Taxpayer burden: The government plans to buy up mortgage-backed assets at its "maturity" value, which is well above the current market value. If the value of these assets does not recover in the next few years, it will get expensive for taxpayers.
- Ballooning state debt: The plan would swell the budget deficit, which could fuel inflation, economists warn (Mr Paulson has asked to raise state borrowing to $11.3 trillion, from $10.6 trillion).
- True cost of the deal or how long is piece of string? Since authorities would have the power to buy almost any asset at any price and sell it at any future date, it is almost impossible to calculate the real cost of this deal.
- Bankers' big pay: There are worries about controlling the mega-bucks bosses earn at the very banks being bailed out - given the view that it was Wall Street "that got us into this mess in the first place".
- The phenomenal power of US Treasury Secretary Henry Paulson: The rescue plan is his baby and he will control how the $700bn is spent.
- Too much exposure: Some congressmen object that they want the government to have the right to take a minority stake in any firm that is being bailed out, which would give the state the right to purchase stock in companies in the future.
- Governance: The plan is a twice-yearly report - critics insist on greater oversight and reporting.
- Main Street versus Wall Street: There are calls for this package to be extended to help ordinary Americans who are at risk of losing their homes.
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