Shares

US Congressional leaders and the Bush administration have reached a tentative deal on a bailout of imperiled financial markets that could cost taxpayers hundreds of billions of US dollars.

The last week or so has seen an extraordinary set of events which saw shares first plunge following the failure of Lehman Brothers and the “rescue” of AIG only to surge on the back of plans by the US Government to buy bad and illiquid debt from financial companies along with bans on short selling.

There are some very nervous bankers and others in the financial world awaiting the approval of the $US700 billion bailout from the US Congress and Government.

The Reserve Bank has moved to try and solve a shortage of US dollars in the Asian area by joining a swap arrangement involving the US Federal Reserve.

The Federal Government had revealed its preferred approach to controlling the shorting of shares and other securities by not banning it but by substantially increasing the disclosure and reporting of the process.

The slowdown underway in the resources boom is illustrated from the latest commodity forecasts from ABARE, the Australian Bureau of Agricultural and Resource Economics.

There’s nothing more to be said about the markets last week except that we all survived, battered, bruised, shell shocked and worse if you were shareholders in some American companies no longer with us like Lehman Bros, Merrill Lynch, AIG, Macquarie, HBOS and a host of other financial stocks.

Very quietly compared to all the noise about the big bailout proposal from the US Government and the other move for the Fed to offer a lifeline to struggling mutual cash management funds, new steps to relieve distressed commodities markets were launched Friday by US regulators after Lehman and AIG woes triggered a wave of selling and emergency actions by exchanges earlier in the week.

Developments in the US financial system and the Bush Administration’s plan to buy bad debts will no doubt be the key focus in the week ahead.