US stocks soar on 'unprecedented' plan
US stocks soar on 'unprecedented' plan
Friday 19th September 2008
The Dow Jones industrial average leapt 400 points in early trading after George Bush announced a plan to rescue banks from the financial crisis.The index hit a high of 11,463.11 by 09:52 EDT (14:52 BST) after opening higher this morning.
And it had reached 11,355.14 five hours later, still up over three points on the day's trading.
The president today announced a series of proposals to renew stability to the US - and world financial system.
"This is a pivotal moment for the America's economy," Mr Bush said, standing beside Federal Reserve chairman Ben Bernanke and United States Treasury secretary Hank Paulson.
"Problems that originated in the credit markets and first showed up in the area of subprime mortgages have spread throughout our financial system."
He added this had now frozen loans to consumers and firms.
"As a result we must act now to protect our nation's economy from serious risk. Government intervention is not only warranted but essential."
"America's economy is facing unprecedented challenges and we are responding with unprecedented action."
Presidential hopeful Barack Obama backed the plan, while rival John McCain has made a stand against the Federal Reserve bailing out firms put at danger by their own risk taking.
Mr Paulson and Mr Bernanke told reporters yesterday they plan to work through the weekend with Congress on a plan to rid the banking system of the bad debts that are creating turmoil and met with representatives from both parties last night to secure a deal.
Shares on the Dow Jones industrial average rallied yesterday afternoon on hopes the talks would lead to a permanent fix to the crisis on Wall Street, jumping around four per cent to 11,019.70.
The news helped boost shares in Morgan Stanley, which is said to be in talks with potential rescuers, by 25 per cent by 10:15 EDT (15:15 BST) today.
It is thought the solution could be based on the Resolution Trust Corporation model, a government agency created as a response to the savings-and-loans crisis in the 1980s.
The agency took on bad debt from failing savings groups and liquidated the assets, restoring confidence in the market.
Earlier yesterday the Federal Reserve led a global effort to prop up the markets with a $180 billion (£99 billion) cash injection to the credit markets.
However, the action was seen as a short-term fix for the problems and stock markets on both sides of the Atlantic only rallied briefly before sliding again.
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