The US Senate has voted to back a $700bn financial bail-out plan by a large majority.
The Senate voted 74 to 25 to back the plan after the bill was reworked to offer additional concessions to families and small businesses.
The original bill was rejected by the US Congress as politicians did not want to give taxpayer’s money to ‘fat-cat’ Wall Street bankers, and many said the plan amounted to socialism.
If the bill is passed by the House of Representatives, the US Government will be able to buy up bad debts from banks, allowing them to shift risk from their balance sheets and restore confidence in financial institutions.
However, the deal was sweetened with a range of tax breaks for families and small businesses, and to promote renewable energy projects. Recent hurricane victims will also receive additional help.
The Government will also raise the level at which it guarantees bank deposits from $100,000 to $250,000 to reassure ordinary savers.
The US Treasury Secretary, Henry Paulson, will hope the concessions for ordinary Americans will help win over sceptics in the House of Representatives when it votes on Friday.
"The American people expect - and our economy demands - that the House pass this good bill this week and send it to my desk," said President Bush following the Senate’s approval of the bill.
Shares in Europe reacted positively to the news, with the FTSE 100 up 0.96% to 5,007 by mid-morning, the Dax increased 0.65% to 5,843.85, while the Cac 40 was up 1% to 4,095.05.
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