September 28, 2008 (Sunday): Tentative Agreement on Bailout; More Bank Upheaval

It could cost taxpayers $700 very big ones — as in billions — but many breathe a sigh of relief as the Bush administration and Congressional leaders reach a tentative agreement on a bailout. The deal, which could prove to be the biggest financial rescue in U.S. history, will let the Treasury Department buy $700 billion in debt from companies in trouble. It is described as a necessary intervention to prevent a broad meltdown of the economy. Congressional staffers are expected to pull all-nighters to draft a bill that can be brought to the floor for a vote on Monday. Among the provisions: some pay limits for executives whose firms take aid, and a requirement that the government seek to prevent home foreclosures. (For more on this news, click here and here.)

Federal regulators are said to be pushing for Wachovia, the country’s fourth largest bank, to sell itself. Wells Fargo and Citigroup are two potential purchasers, the New York Times reports. If a sale goes through to one of those banks, it would further concentrate the nation’s deposits in the hands of just three institutions — Bank of America, JPMorgan Chase and the bank that acquires Wachovia. Concerns are raised that the concentration would give the banks enormous control over loans and services, the Times reports. But it is expected there will also be stricter regulations. (For more on this news, click here.)

The global economy gets a little smaller today. Prime Minister Yves Leterme of Belgium and European Central Bank president Jean-Claude Trichet make an unprecedented joint appearance to announce the rescue of Fortis, a Belgian-Dutch financial conglomerate. Fortis is partially nationalized in the rescue, and receives an injection of 11.2 billion Euros from three governments. Meanwhile, Bradford & Bingley, a British bank, is seized by local regulators after no private buyers emerge over the weekend. It becomes the third British bank to collapse this year. (For more on this news, click here.)