Banking Bailout To Include Foreign Banks

By David Hinz - Posted on September 21st, 2008

A closer examination of the proposed $700 billion financial institution bailout legislation before Congress shows that the legislation is intended to include foreign banks that do significant business in the United States.

Treasury Secretary Henry Paulson told George Stephanopoulos on ABC's This Week, "If a financial institution has business operations in the United States, hires people in the United States, if they are clogged with illiquid assets, they have the same impact on the American people as any other institution."

"That's a distinction without a difference to the American people. The key here is protecting the system. ... We have a global financial system and we are talking very aggressively with other countries around the world and encouraging them to do similar things, and I believe a number of them will. But, remember, this is about protecting the American people and protecting the taxpayers. and the American people don't care who owns the financial institution. If the financial institution in this country has problems, it'll have the same impact whether it's the U.S. or foreign," he went on to say.

According to the outline that accompanied the proposed legislation sent to Congress Saturday, only those institutions headquartered in the United States are eligible for the bailout guarantees.

But, according to The Politico foreign institutions that have large holdings in American mortgage holdings would be included. This means that giants such as Barclays, Credit Suisse, Deutsche Bank, HSBC, Royal Bank of Scotland and UBS would all qualify for US Federal bailout money.

Rep Barney Frank (D-MA) is expected to hold hearings of his House Financial Services Committee on Wednesday, with the legislation expected to reach the House floor on Thursday and immediately passed.

The Senate is expected to pass the legislation on Friday with the whole bill reaching the President's desk by the weekend.