Stocks plummet as the House votes for the bail-out plan

The House is going to vote for the $700b bail-out plan today. In contrast to the 3 page proposal Henry Paulson, the Treasury Secretary, started with, the rescue plan is now 110 pages long, and has added numerous provisions demanded by legislators. The changes include allowing the government to modify the terms of the mortgage payments to protect homeowners from foreclosures, authorizing the Fed to pay interest rates on the reserves maintained by banks and thus the power to pump unlimited cash into the money-market. The Troubled Asset Relief Program, or Tarf, will give Mr. Paulson or his successor enough flexibility to buy trouble mortgage-related assets, and anything else necessary, from ailing financial institutions, to stabilize the financial system. Mr. Paulson now will be given only $250b immediately, $100b more at the President's discretion and $350b upon approval by Congress, instead of a $700b lump-sun he initially proposed.

Along with the going-at-light-speed legislative procedures on Capital Hill, the Federal Reserve, together with centrals banks in Europe, continued to pump billions of capital into the financial system in both Continents in an attempt to firebreak the latest stage of the credit crisis. Last week in America saw the collapse of Washington Mutual, the biggest-ever failure of commercial bank. And in the past weekend, several financial institutions in Europe had been bailed out by governments.

Stock markets around the world had rebounded last week in anticipation of the plan. Now with both the Democrats and the Republicans extracted numerous concessions from the bill, the bail-out plan is expected to pass the House today, and the Senate this week. Nevertheless, as investors are worried by the latest eruptions in the past weekend, stock markets plummet again today.