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Last Updated: Saturday October 04 2008 11:41 GMT

US to spend $700bn to help banks

US politicians vote to pass the bail-out

American politicians have agreed to spend $700bn (400bn) to try to get their banks out of a huge problem.

Lots of banks all around the world have been having trouble recently, as part of something called the credit crunch.

Banks lent money to people who couldn't pay it back, which meant some banks ran out of money, and went out of business.

Now America has decided to give banks enough cash to cover the money they can't get back from the people they shouldn't have lent it to.

Graphic showing a $700 billion sign
Not everyone is happy about the rescue plan, though because the money that is being given to banks has come from ordinary people through the taxes they pay.

Banks need money to help business

If banks don't have enough money it's really bad for businesses all over the world, including the UK.

Normally banks lend cash to each other, as well to people and businesses, but if they don't have money themselves, they can't do that.

The problems aren't over yet though.

Even though the American government has agreed to spend the money, the country's experts now have to figure out the best way to spend it to make things better.


It's the second time that politicians have been asked to vote on this issue, which has been called a financial rescue plan and a bail-out.

On Monday they decided some of the details weren't quite right, so voted against it.