The massive $700 billion intervention in the financial markets proposed by the US Government has run into opposition in Washington amid critical comments from voters that ordinary American taxpayers would be paying to rescue profligate and wealthy bankers.  The US government estimates that the rescue package could cost every US taxpayer more that $5,000 each.

Nevertheless, commentators forecast that the deal would go ahead before Congress shuts down this week in the run up to the presidential elections.  President Bush addressed the nation last Wednesday to set out how vital the package was and to ram home the message that without it, the US economy would suffer badly.  Although the message was directed at Americans, it emphasised just how important the rescue package was to financial markets around the world.

Markets had soared when Hank Paulson, the US Treasury Secretary (the US equivalent to the Chancellor of the Exchequer) announced that the American government was proposing to buy huge swathes of the debts held by banks, releasing them to start trading again.  When it became clear that Congress might not rubber stamp the deal, markets reacted badly and banks virtually refused to lend to each other.  Many banks seemed happier to lodge any spare cash with a central bank like the Bank of England than to lend it for higher rates of interest to other banks. 

If the deal does go through, as expected, it is hoped that it will put an end to questions marks over the viability of the big banks and free them up to start lending again.