U.S. Bailout Not to See Immediate Effects

Right after the U.S. House of Representatives passed the bailout package Friday, President George W. Bush signed it into law, spurring his administration’s efforts to use tax money to buy bad assets of financial institutions.

According to U.S. media including The New York Times, the Treasury Department is contacting five to 10 asset management companies for the 700 billion dollar bailout, the largest since the Great Depression.

Treasury Secretary Henry Paulson convened an emergency meeting after the bill’s passage Friday to determine details such as the scope of the assets subject to government takeover, assessment of the values and procedures. He said he conducted numerous studies and processes in anticipation of the passage and will put the plan in practice as fast as possible.

The Treasury Department will reportedly first hire civilian asset managers and specialists and then set detailed guidelines on how to appraise bad assets and use the bailout money.

U.S. media say it will take at least three weeks and up to two months for the federal government to buy bad mortgage-backed securities.

President Bush confirmed the speculation in his weekly radio address Saturday, speaking cautiously about the immediate effects.

“My administration will move as quickly as possible, but the benefits of this package will not all be felt immediately,” he said. “The federal government will undertake this rescue plan at a careful and deliberate pace to ensure that your tax dollars are spent wisely.”

The House passed the bill 263-171 Friday and President Bush signed it into law the same day.

Doubts are spreading, however, over the move’s effectiveness in preventing a recession. Amid this anxiety, the prices of major raw materials showed their steepest weekly drop last week in 50 years.

The Reuters/Jeffries CRB Index, which measures the futures prices of 19 commodities, retreated 10 percent last week, the biggest drop since 1956.

higgledy@donga.com