The US financial services sector could be forced to reimburse the government for any losses on its $700bn rescue plan under a breakthrough political agreement that paves the way for congressional approval as early as today.
After a weekend of frenzied negotiations, Hank Paulson, the Treasury secretary, and Nancy Pelosi, the Democratic House speaker, announced early yesterday that a tentative agreement had been reached authorising the government to buy up to $700bn of troubled assets from financial institutions.
Paulson told the Financial Times: 'It was a complex negotiation but we managed to satisfy the different concerns in a way that will still be effective in the marketplace. We aim to start buying illiquid assets in the next several weeks.'
The deal envisages historic restrictions on executive pay for banks participating in the programme and opens the door for the government to take equity warrants in those institutions.