The financial bailout plan was finally cleared in the US House of Representatives. It was signed by President Bush on October 3. The bailout plan will make funds available to troubled banks by purchasing the bad mortgages.

As the bill was introduced in the House, a positive wave flew all around. The bill passed with 263 votes in favour and 171 against it. The bailout plan will act as life saver for the cash starved banks. The bill was necessary to establish financial stability in America. Any further delay would have deepened the crisis in America.


If the bill had failed to pass muster then the outcome would have been very dangerous. Current turmoil is being compared to the great depression of 1929. It swallowed number of banks and the same would have been the case had US government not come to the rescue.

The clearance of this bill will slowdown the retrenchment spree. According to reports, around 159,000 jobs were lost in the month of September. The bill was initially rejected by the house on Monday. However, certain changes in the bill helped Bush government to secure the majority in the house. Supporters opined that the bill was necessary to prevent economic collapse. The rescue plan will permit treasury to buy the troubled mortgages from the financial firms. This will provide the banks with the required funds.


If bad loans are cleared from bank slates then the funds will start flowing and it will restore the normalcy in the market. The United States of America is considered to be the symbol of capitalism. The government has rightly stepped forward to help the private sector firms to overcome crisis. This will further improve the relationship between the government and the private sector firms.


The bill was cleared 13 days after it was introduced. Initially, it reflected that the bill gave the government the use US $700 billion from the treasury at its own sweet will. However, after suitable changes like tax breaks for the production, use of renewable source of energy it was passed much to the relief of all. According to estimates, the amount required for the bail out will less then US $700 billion. This is because the purchased bad properties will be sold out at higher prices, thus resulting in positive returns for the government.


However there is another side to the rescue bill. If the amount is finished at the end of five years and the government has to stop the turmoil then the government has to recover the amount by tax collection on the securities transactions.