US President George Bush has sought to curry favour for the Treasury's $700bn (£388bn) bank bailout by claiming that while today's vote on the plan will be a "difficult", the move could end up costing the US taxpayer nothing.

The Telegraph | September 29, 2008
By Jonathan Sibun

In a televised address before the open of the US markets President Bush called on Americans to back The Emergency Economic Stabilization Act of 2008 (EESA) ahead of a crucial Congress vote at about 6pm London time.

In a speech designed to assuage the concerns of Main Street, Mr Bush said the intention of the EESA was to "restart the flow of credit so American families can meet their daily needs".

While the plan has the backing of senior Republicans and Democrats, including the Presidential candidates, doubts remain over whether it will be passed by Congress.

Speaking to CNBC, House Majority Leader Steny Hoyer said: "We are hopeful but we're not sure. We think we will have the votes, but it is a tough vote."

The plan will see the US Government offer to buy bad assets from banks for a two-year period but the Treasury has been forced to offer a number of concessions to reduce concerns in Congress and among the American public.

Banks will be forced to issue stock warrants to the Government if they choose to use the facility, while the Treasury has also promised strong supervision of the EESA and protection for US homeowners.

In what could be seen as a crucial concession, the bill calls for the US Treasury to do everything in its power to prevent foreclosures of homes, in a move that would allow it to change the terms of individual mortgages to protect homeowners.

The EESA will make $250bn available immediately to banks, with a further $100bn on hand if the President calls for it. The availability of the second $350bn would be subject to congressional review.

Mr Bush admitted that "many Americans are worried about the cost" of the plan but said the ultimate cost could be "far less" than $700bn amid hopes that the taxpayer would profit from asset sales in the future.

"Much if not all of the tax dollars we invest will be paid back," Mr Bush said. "A vote [for the EESA] is to prevent economic damage for you and your community."

Although he cautioned that the bailout for troubled Wall Street banks will not answer all US economic woes.

"Even with the important steps we are taking to address the current crisis, we will continue to face serious challenges," Mr Bush warned, adding that the credit crisis and housing woes "will continue to pressure our financial system and impact the growth of our economy for some time."

In a further move to placate ordinary Americans' anger at Wall Street, the EESA could also force the US financial sector to reimburse the government for any losses it incurs.