Saved - America finally rescues banks and now petrol could fall to 74p a litre
THE world’s economy was saved from total disintegration last night when the United States Congress finally agreed the biggest banking bail-out of all time.
The £397billion package means that struggling US banks will be shored up, with massive knock-on effects for the financial markets and, ultimately, hard-pressed families in Britain.
In separate good news, supermarkets embarked on another petrol price war led by Asda and Morrisons, who will today cut pump prices by up to 2p a litre. At the same time, analysts forecast that the price of a barrel of oil could fall to as low as $30 by next year, which would see petrol plummet to around 74p a litre.
The historic American rescue package, passed by 263 votes to 171 by the House of Representatives, will restore confidence in the world’s shattered financial institutions.
These have been in meltdown for the last two weeks after the collapse of a number of banks. The importance of the deal for Britain cannot be overestimated. Interest rates and shares will become more stable and savings in banks and building societies more secure – good news for pension funds and those with share-linked savings plans.
Ultimately, restored confidence should allow banks to relax their iron grip on lending, which should see mortgage rates lowered, freeing up consumers to spend again.
One analyst said: “The markets have collectively been holding their breath for this and it is the news that everyone wanted to hear.
“If the deal had not gone through, it would have had a severe impact on confidence and certainly made the situation worse, but there is still a long way to go before things return to normal.”
How long any renewed stability in the markets will last remains to be seen, and City analysts warned that there would still be months of “some turbulence” ahead. “But it’s certainly a very good step in the right direction,” added one.
In anticipation of a passed vote, markets rose around the the world. The FTSE 100 share index in London closed up 109.9 points, 2.26 per cent. The Dow Jones in New York also enjoyed a bounce, rising more than 250 points – 2.5 per cent – before sliding away a little later.
Political leaders on both sides of the Atlantic were cheered by the passing of the Bill. They had been stunned when the House of Representatives rejected an earlier version of the legislation.
After emergency revisions, the new measure added about $100billion in new tax breaks in the hope of gaining more support from Republicans.
President Bush also pleaded with the House to back the reworked Bill after its rejection by 228 votes to 205 on Monday. The US government will now buy up bad debts from failing institutions.
In turn, it is hoped that this will calm world markets after the greatest period of financial turmoil in living memory.
After the Bill was passed, a jubilant but equally relieved President Bush gave a TV address to the nation which was beamed around the world. He said: “Action was necessary. We have shown that the United States of America will
stabilise our financial markets and maintain a leading role in the economies of the world.”
But he warned: “Our economy still faces serious challenges.”
Meanwhile, aware that the financial crisis is by no means over, Gordon Brown will today meet other European leaders in Paris for an emergency summit, although he ruled out any similar EU rescue package.
In response to the loss of confidence from savers, the Government yesterday raised the threshold of secured personal savings to £50,000 per person per bank.
This limit is for each customer, so joint accounts will be guaranteed up to £100,000.
The markets have collectively been holding their breath for this
AT LAST, JOY FOR DRIVERS
TUMBLING fuel costs will give drivers a boost this weekend.
A fresh price war was ignited at the pumps, with Asda cutting 1p off unleaded and 2p off diesel at its 170 filling stations from today. The cuts bring its fuel prices to their cheapest since April.
Unleaded at Asda is now 105.9p a litre and diesel 116.9p. Falling wholesale oil costs were behind the reductions.
Rival chain Morrisons made the same cuts last night – while Tesco and Sainsbury’s pledged to stay competitive. Oil giant Total last night announced further cuts at its 500 UK forecourts.
Motoring group the AA welcomed the lower prices. Spokesman Luke Bosdet said: “Falls in the price of petrol and diesel have been the only piece of good news for families.”
