TEXT OF INTERVIEW
Stephen Beard: The House is expected to vote on a financial bailout package later today. The bailout plan, as it stands now, is still $700 billion. But it's divided this way: The Treasury can spend $250 billion right away to buy up these bad mortgage debts, and there's another hundred billion available at the president's discretion. Congress would have to step in again to spend the other $350 billion. Taxpayers will have ownership stakes and will be the first to recoup any money.
But there are still a lot of doubts about this plan that it's actually going to work, says economist Peter Morici:
Peter Morici: What troubles me is there's nothing in this program to insure that the banks return to lending to ordinary Americans making mortgages. It could well be the banks take this money and go into other financial activities instead. The promised recovery in the housing market will not be forthcoming if the major banks do not return to the mortgage market.
In fact, the stock markets seem very doubtful this morning. We're joined by Stephen Beard in London. Stephen, why are the markets down this morning?
Stephen Beard: Well, I think now that the plan looks like a done deal, investors are looking for something else to worry about. And they're asking themselves, is the Paulson plan really going to address the fact there is still so much fear in the banking system? The banks are just not prepared to lend to each other for fear that they might end up lending to a bank which goes bust a few days later. This morning, the interbank interest rate, the rate at which banks borrow and lend to each other, is higher than it was last week.
Beard: So that's worrying investors.
Jagow: And there are also some problems with banks in Europe as well, there are a couple of situations going on there. Tell us about those.
Beard: Yes, we've had two, two bank nationalizations, no less. In continental Europe, the governments of Belgium, the Netherlands and Luxembourg have clubbed together and put up more than $15 billion to buy a 49 percent stake of the huge and troubled faulties banking group. And here in Britain, the U.K. government has nationalized a huge mortgage lender, Bradford & Bingley. And if you add that to the earlier nationalization in the U.K. of Northern Rock, that means British taxpayers now own $280 billion worth of mortgages.
Jagow: Excuse me, Stephen, I thought the British government wasn't going to bail out anybody.
Beard: Well, that's what they said. Last week, they said we're not going down the American route. But that appears to be what we've got -- we do appear to be having a bailout by the back door, with a little less fanfare than the U.S.
Jagow: All right, Stephen Beard in London. Thank you.
Beard: OK, Scott.