Accord reached on U.S. Bailout Plan

Over the weekend, US lawmakers reach an accord on the Bailout Plan to resuscitate the US financial system. DowJones' Financial News Online reported that "dramatic improvements to the original Bush-Paulson plan to stabilize American financial markets—including cutting in half the Administration's initial request for USD 700 billion and requiring Congressional review for any future commitment of taxpayers' funds. If the government loses money, the financial industry will pay back the taxpayers."

The Summary of the draft proposal to rescue US financial markets envisages Three Phases of a Financial Rescue with Strong Taxpayer Protections

• Reinvest in the troubled financial markets … to stabilize our economy and insulate Main Street from Wall Street
• Reimburse the taxpayer … through ownership of shares and appreciation in the value of purchased assets
• Reform business-as-usual on Wall Street … strong Congressional oversight and no golden parachutes

For more on the proposal, go here.

After this news, one may expect a big rally in Asian stock markets this morning. After an initial rally, most of the markets are in negative territory. What's wrong? Is this a case of "buying-on-rumors and selling-on-news"? Are investors disappointed with some of the safeguards to be imposed to protect taxpayers such as:

• Cuts the payment of $700 billion in half and conditions future payments on Congressional review
• Gives taxpayers an ownership stake and profit-making opportunities with participating companies

We will have to wait & see how the markets digest this news in the days and weeks ahead. My feelings is that the rescue package will help stabilize the financial markets & put a floor on the stock markets.