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Thaindian_Sept 29, 2008_Indian Investors Nervous on US Bailout Plan Details

Thaindian_Sept 29, 2008_Indian Investors Nervous on US Bailout Plan Details

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Published by Jagannadham

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Published by: Jagannadham on Nov 03, 2008
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 Indian investors nervous on US bailout plan details
September 29th, 2008 - 5:17 pm ICT by IANS -New Delhi, Sep 29 (IANS) Indian investors are a nervous lot, and say the bailout bill announcedby the Congress is a much watered down version of what was expected and is needed to addliquidity in the system. The Emergency Economic Stabilization Act of 2008 involves taxpayerguarantees and ceilings on executive compensation. The Congress is slated to vote on the bailoutbill Monday, and the Senate vote is likely Wednesday.“There are several major points for nervousness in the markets,” said
, head of the capital markets arm of India’s fourth largest share brokerage firm, theDelhi-based SMC Group.“There is a lot of nervousness as also a large element of uncertainty,” confirmed NareshPachisia, managing director of SKP Securities Ltd, eastern India’s largest distributor of financialproducts and financial services firm.“Two years back all asset classes across the world were moving up as there was a lot of liquidityin the system,” Pachisia said.“Right now there is no liquidity anywhere, so how can you expect markets to grow?” he said.“The first major point of nervousness is that the US bailout plan will now be in three tranches of $250 billion, then $100 billion and finally $350 billion and the second and third tranches willrequire further Congressional approval,”
said.“This means effectively, only $250 billion is now available for buying troubled assets of banksinstead of $700 billion outright,” he said, adding: “This doesn’t really solve the problem of liquidity.”“The second point is that the plan requires that the Troubled Assets Relief Program (TARM) willbuy out troubled assets but it will have to sell off these illiquid assets within five years and earnmore than the $700 billion that will be used to buy them,”
said.“If at the end of five years, the TARM is unable to earn more than $700 billion by selling off illiquid assets, then the banks and institutions concerned, from whom the illiquid assets are nowbeing bought, will have to compensate the losses.”“This again really means that the problem has just been deferred and not entirely removed andnobody knows what will be the long-term consequences. This again does not solve the problemof uncertainty,”

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