Page last updated at 22:34 GMT, Thursday, 15 January 2009

Senate backs bank bail-out plea

Tackling unemployment is one of the key aims of the stimulus

The US Senate has given approval for President-elect Barack Obama to spend the remaining $350bn (239bn) of the US financial bail-out fund.

Some fierce opposition to the move was quelled after Mr Obama's team promised that up to $100bn of the fund would be spent on tackling the mortgage crisis.

The vote came after Democrats in the House of Representatives unveiled plans for a separate $825bn stimulus plan.

The mix of tax cuts and spending is aimed at turning around the US economy.

That bill, which has been developed with Mr Obama, aims to create millions of jobs as it attempts to halt the recession.

The stimulus bill will add to the US's expected $1.2tn budget deficit.

Aggravation risk

The release of the $350bn - the second half of a $700bn rescue package for finance firms announced last year - had faced some strong opposition for offering too much help to corporate giants.

But the Democratic-led Senate voted 52-42 against a Republican resolution that would have blocked the request to make the money available.

Had the payout been blocked, funds would still have been likely to be available because any disapproval could have been vetoed by President Bush.

But observers said that if the payout was rejected, it could aggravate financial markets.

$550bn in emergency spending with $275bn in temporary tax benefits
Hundreds of billions of dollars for rebuilding roads and bridges and giving aid to schools.
Workers get a refundable $500 tax credit ($1,000 for a couple)
States get $87bn to help with health benefits for the poor

'Bang for buck'

Mr Obama praised the $825bn stimulus plan as a "significant downpayment on our most urgent challenges".

"It will contain the kind of strict, independent oversight that will allow the American people to hold Washington accountable for how and when their tax dollars are spent," he said.

House speaker Nancy Pelosi acknowledged that the proposed bill was only the "first step" in trying to push a plan through Congress, and that the numbers may change.

"Immediate job creation and continuing job creation" were the key aims, she added.

"We wanted to get the biggest bang for the buck of every dollar spent," Ms Pelosi said.

Called the American Recovery and Reinvestment Plan, it proposes $550bn in emergency spending with $275bn in temporary tax benefits over the next two years.

Firms would be allowed to write-off losses against the past five years of tax, instead of the two years currently permitted.

And workers will get a refundable $500 tax credit, as pledged during Mr Obama's campaign. Hundreds of billions of dollars would be spent rebuilding roads and bridges and giving aid to schools.

States would receive $87bn to help with health benefits for the poor.

There would be careful scrutiny of how money was spent, the Democrats added.

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