Bailout Jitters affect Israeli stock market

Last update - 12:07 02/10/2008    

 

 TASE opens to sharp losses as Senate okays $700B bailout  By Tal Levy and Yuval Maoz, TheMarker and The Associated Press

The Tel Aviv Stock Exchange opened to sharp losses Thursday, hours after the U.S. Senate approved a landmark $700 billion bailout package for the beleaguered American financial sector. The bill now goes to the House of Representatives for approval.

 

In Tel Aviv, the TA-25 fell 3.1 percent to 858 points while the TA-100 dropped 3.6 percent to 774 points. The TA-Real Estate 15 Index recorded a 7.4 percent loss while the Tel Tech 15 lost 3.4 percent of its value.

 

The Senate approved the $700 billion bailout late Wednesday as opposition to the package among House Republican conservatives appeared to be softening, thanks partly to a provision increasing insurance for bank deposits.

 

Bailout was approved by a vote of 74 to 25. Both presidential candidates Barack Obama and John McCain voted in favor.

 

President Bush called on the U.S. House of Representatives to pass the deal, saying in a written statement that, "With the improvements the Senate has made, I believe members of both parties in the House can support this legislation."

 

"The American people expect - and our economy demands - that the House pass this good bill this week and send it to my desk," Bush said, adding that the bill is "essential to the financial security of every American."

 

Congressional leaders from both parties said they were hopeful that a new version of the rescue plan could be cleared late this week after its stunning defeat that sparked a historic stock sell-off on Monday. House Democratic leaders tentatively planned a Friday vote.

 

One House Republican who joined two-thirds of his party's lawmakers Monday in voting 'no' indicated he was reconsidering his stance. Others were also pondering a switch, according to congressional officials who spoke on condition of anonymity because they have not publicly committed to changing their votes.

 

Rep. John Shadegg, a leading conservative, told a radio station Wednesday that he would be inclined to vote in favor of the bill if it raised the cap on federal deposit insurance and changed a rule that forces companies to devalue assets on their balance sheets to reflect the price they can get on the market.

 

The revised package to be voted on in the Senate, which adds $100 billion in tax breaks for businesses and the middle class, temporarily increases the deposit insurance cap from the current $100,000 to $250,000. The Securities and Exchange Commission said Tuesday it was easing the accounting rules in some cases.

 

In a statement Wednesday, Rep. John Boehner, the Republican minority leader, called both a victory for House Republicans.

 

Congressional leaders said the changes should improve the package's chances - a message they hoped would not get lost on a convulsive Wall Street and global financial markets waiting for a solution to the crisis.

 

Some also saw heightened odds for the measure based on a flood of e-mails, calls and letters from constituents chiding Congress for inaction on the financial crisis. The feedback indicated greater public acceptance of the measure - if not a collective embrace - by voters about five weeks before the elections.

 

House Republican Whip Roy Blunt said calls and e-mails to congressional offices that were running about 90 percent against the measure earlier now are coming in at about a 50-50 pace.

 

Even a 50-50 proposition might have been attractive on Wall Street, where the Dow Jones industrials at times lost more than 200 points in their third triple-digit move this week. Credit markets remained extremely tight and stocks also fell on a report that an index of manufacturing activity fell significantly in September.

 

U.S. President George W. Bush planned to call lawmakers ahead of the crucial vote, Democratic presidential nominee Barack Obama and his Republican rival, John McCain, planned to fly to Washington for the Senate vote, as did Democratic vice presidential nominee Joe Biden, adding to the political intrigue, and the White House continued to lobby hard, both publicly and privately.

 

At the daily briefing Wednesday, spokesman Tony Fratto took the unusual step of citing the New York Times, as well as papers across the country that carried stories on the tightening credit squeeze on small businesses, municipal projects and jobs. "It is affecting real Americans out there," he said.

 

The legislation essentially would allow the government to buy bad mortgages and other devalued assets held by troubled financial institutions. If successful, advocates of the plan believe, that would help lift a major weight off the already sputtering national economy.

 

Officials in both parties predicted the measure would pass the Senate by a wide margin.

 

Behind the scenes, the president was conferring with Treasury chief Henry Paulson and Fed chairman Ben Bernanke to get an update and to plot strategy. The presidential spokesman told reporters that Bush's calls so far have all been very positive. "We feel that there's a sense of momentum," he said.

 

Fratto called the increased deposit insurance an important improvement to the bill, and also welcomed the added tax breaks, calling them helpful despite the White House's initial desire for a clean bill.

 

Scrambling to revive a package that met with bitter derision among constituents who viewed it as a giveaway to Wall Street, the Senate added a number of sweeteners designed to please rural lawmakers, including disaster aid for hurricane-battered states and money for rural schools.