Title Economic Rescue Plan : tough times expected despite bailout published to cocoa-touch.
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When Congress rejected a proposed bailout of the staggering U.S. financial system Monday, the defeat sent the stock market spiraling and sent a clear message to Americans: Economic pain is here to stay.
The fallout from the vote may well dig deep into the economy, several financial experts say.
Even if the bailout were enacted by Congress and actually worked, many predicted the economy will probably shrink in the final quarter of this year and in the first quarter of next year, meeting the classic definition of a recession.
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The House's stunning defeat of a $700 billion package urgently championed by President George W. Bush, sent shock waves through Capitol Hill, the trading floors on Wall Street and the Oval Office on Monday.
Mr. Bush warned on Tuesday that the economic damage will be "painful and lasting"
Global stocks fall on US bailout doubts » Kuwait Times Website
... amid widening fears that a US plan to rescue ... We could face more tough times ahead," said Ernie ... the architects of the $700 billion bailout, were expected to face tough ...
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Bailout plan a tough sell - The Denver Post
Bailout plan a tough sell ... to counter any impression that the proposed rescue plan is ... Paulson had been expected to encounter sharp ...
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US markets soar on Wall Street rescue plan hopes - Times Online
I'm beginning to think this is more of a rescue plan for ... campaign aides yesterday indicated that they expected ... on prime time TV to acknowledge that the bailout would be a "tough ...
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McCain, Palin stress that times are tough in US - Yahoo! News
... America and concern about the sinking economy. "Tough times ... Palin is expected to return to Alaska just briefly and ... McCain at dead end as House rejects bailout plan AP, 1 hour ...
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Paulson braces public for months of tough times -- GOPUSA
... for months of tough times By ... The House plans to vote Wednesday on a housing bill that is expected to include a rescue for ... no' on $700B bailout McCain focusing on Iowa despite polls
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TOPWRAP 10-Bailout focus on U.S. House as worries spread
Congress to finish up a $700 billion bailout of the U.S. financial sector. The fate of the rescue plan, passed by ... warned of tough times, as evaporating credit for consumers ... Oil prices were down $3 a barrel on an expected slowdown in economic activity ...
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Source: Forbes
NewsDateTime: 47 minutes ago
Bailout rejected: Angry voters put pressure on pols
How the Washington state delegation voted on the bailout plan: Yes: ... White House, President Bush said he would meet with his economic advisers and develop a plan ... Senate revises rescue plan, will vote on bailout tonight Reichert's record as sheriff ...
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Source: Seattle Times
NewsDateTime: 10/1/2008
Buffett's bet on GE: Almost as good as a bailout
... in good shape — helped by a government economic rescue ... the company ballast in extremely uncertain times. Last Thursday, GE announced that it would report lower-than-expected ... The Senate strongly endorsed the economic bailout plan, leaving ...
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Source: International Herald Tribune
NewsDateTime: 12 hours ago
House ready to try again after Senate approves bailout
... manufacturing reports Bailout tough pill ... some version of the bailout measure to start loans flowing and stave off a potential national economic disaster. But critics on the right and left assailed the rescue plan, which ... Bush warned Congress 17 times ...
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Source: Rocky Mountain News
NewsDateTime: 54 minutes ago
Economic concerns in Colorado
Oct 2: Senate approves rescue plan Oct 1: Bailout passes Senate ... on bailout keep Street tense Sep 24: Bailout plan a tough sell ... does not speak with a single voice and economic times have treated communities differently. In Louisville, even despite ...
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Source: Denver Post
NewsDateTime: 8 hours ago
"An economic 9/11," warned Terry Connelly, dean of Golden Gate University's Ageno School of Business, of the potential fallout. As the package went down, panicked investors caused the Dow Jones industrials to nosedive nearly 780 points in their largest one-day point drop ever. Markets across Asia fell sharply Tuesday in the wake of the Wall Street downdraft.
Lawmakers defeated the legislation by a 228-205 vote, although Democratic and Republicans leaders and Treasury Secretary Henry Paulson all pledged to keep working for a package acceptable to all sides.
Vowed Mr. Bush: "This is not the end of the legislative process."
In the meantime, the economic wreckage that the administration and Congress have warned about - rising unemployment, shrinking nest eggs and prolonged recession - might not happen immediately, but that doesn't mean it won't happen at all.
"This is like the advice you get from the doctor who says you should quit smoking," said Robert Brusca, chief economist at Fact and Opinion Economics in New York. "You know he's right. But if you don't, you're not going to die tomorrow and you're not going to die next week. But at some time, it's probably going to get you."
For now, Treasury was expected to work with other government agencies, including the Federal Reserve and the Federal Deposit Insurance Corp., to deal with problems on a case-by-case basis.
"Our tool kit is substantial but insufficient" without a bailout, Paulson warned.
There are some steps the Federal Reserve can take to cushion damage from the worst credit crisis since the Great Depression.
The Fed, which has been providing billions in short-term loans to help banks overcome credit stresses, could keep expanding those loans in an effort to spur financial institutions to lend more freely again. And, it could keep working with other central banks to inject billions into troubled financial markets overseas.
Undoubtedly, both businesses and consumers will run for cover. They will clam up. The snowball hitting the economy will pick up speed and gather mass.
Ken Mayland
economist, ClearView EconomicsAlso, the Fed could make it easier for banks and investment firms to draw emergency loans from the central bank by expanding the type of collateral they pledge to back those loans.
And, if the credit crisis were to turn even worse, the Fed also has the power in extreme circumstances to expand emergency lending to other types of companies and even to individuals if they are unable to secure adequate credit from other banking institutions.
The Fed also could do an about-face and start cutting its key interest rate again. The Fed in June halted an aggressive rate-cutting campaign and has kept its key rate since at 2 percent.
While some Fed officials doubt that another rate reduction would do much to boost confidence and persuade banks to begin lending again, Brian Bethune, economist at Global Insight, insists a deep cut would pack a powerful punch. It would lower the prime lending rate, now at 5 percent, that serves as a benchmark for credit card rates and many other types of loans.
Peter Morici, an economics professor at the University of Maryland, suggests Americans should be conservative with their money and focus on paying down debts.
However, Morici told CBS' The Early Show that without some sort of government intervention, "everyone's personal finances are going to be worse. This has to be solved."
If Congress doesn't act, analysts, who were scrambling to downgrade their economic forecasts, believe the U.S. economy could shrink even further.
The unemployment rate - now at a five-year high of 6.1 percent - is expected to hit 7 or 7.5 percent by late 2009, which would be the highest since after the 1990-91 recession. Some economists say the jobless rate could rise even more.
"Undoubtedly, both businesses and consumers will run for cover. They will clam up," said economist Ken Mayland, president of ClearView Economics. "The snowball hitting the economy will pick up speed and gather mass."
More banks could fail, too. In the second quarter that ended in June, the Federal Deposit Insurance Corp. estimated 117 banks and thrifts were in trouble, the most since 2003. The threat of more banks failing in the U.S. and abroad forced the government to act swiftly.
The tanking stock market and falling home values - the single-biggest assets for most Americans - have taken big bites out of people's wealth and their retirement accounts even as high energy and food prices are shrinking paychecks. Consumers are major shapers of the U.S. economy. If they retrench, the country will go into a tailspin.
The bailout plan was intended to revive jittery and fragile banks on Wall Street and Main Street by buying billions upon billions of their worst mortgage-related assets so that lending, the oxygen of the American economy, would flow freely again.
"People are going to go home and look at their 401(k)'s and not be very happy, and these are not just people from New York, but Iowa and everywhere else. This bill is meant for everyone - not just Wall Street but Main Street," said longtime New York Stock Exchange floor trader Theodore Weisberg.
For some perspective on the value of $700 billion, consider this:
According to the Wall Street Journal, half the money FDR spent on his New Deal program to lift the country out of the Depression and banking crisis was for public works projects. For $250 billion in today's dollars, the nation got 8,000 parks, 40,000 public buildings and 72,000 schools.
On a more mundane level, $700 billion could pay the wages of 22 million average Americans for a year. (According to the Labor Department, the average nonsupervisory, non-agricultural wage was $612 a week in August.)
The government could pay off the $550 billion in outstanding student loan debt in the United States, and then some. That's from both government and private lenders.
Seven hundred billion dollars is five times what the federal government has devoted to Gulf Coast recovery in emergency funds and tax credits since Hurricane Katrina.
The number of Americans continuing to collect uninsurance claims increased by 48,000 to 3,591,000 for the week ended Sept. 20, the most recent week available. The 4-week moving average jumped 46,750 to 3,528,500 from the preceding week.
Economists from Briefing.com expect September job losses to spike to 105,000 and for the unemployment rate to remain steady at 6.1% when the government's monthly report is released Friday. The economy already has lost 605,000 jobs this year
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