Business news

By COMBINED WIRE SERVICES

Congressional negotiators reach agreement on bailout

WASHINGTON – Warned that time was running short to bolster the distressed economy, congressional Republicans and Democrats reported agreement in principle Thursday on a $700 billion bailout of the financial industry.

The core of the plan envisions the government buying up sour assets of shaky financial firms in a bid to keep them from going under and to stave off a potentially severe recession.

With the administration's original proposal considered dead in Congress, House leaders said they were making progress toward revised legislation that could be approved.

Lawmakers in both parties have objected strenuously to the rescue plan over the past two days, Republicans complaining about federal intervention in private business and Democrats pressing to tack on more conditions and help for beleaguered homeowners.

Buffett pumps $5 billion into Goldman, may add more

SAN FRANCISCO –Warren Buffett's Berkshire Hathaway agreed Tuesday night to invest as much as $10 billion in Goldman Sachs Group. Shares of Goldman rose 6.4 percent to close at $133 on Wednesday, while Berkshire's A and B class shares gained more than 3 percent.

Berkshire will invest at least $5 billion in Goldman by buying perpetual preferred stock issued by the investment bank. The securities pay a dividend of 10 percent and are callable anytime at a 10 percent premium, meaning Goldman can buy them back at the higher price.

Berkshire also received warrants to buy $5 billion of Goldman common shares, at $115 a share,  that can be exercised at any time over the next five years.
With Buffett's investment, Goldman has raised about $10 billion in new capital this week.

Goldman and rival Morgan Stanley, the last two major, independent brokerage firms, gained approval on Sunday to become bank holding companies.
Berkshire already has big investments in banks and other financial companies, including Wells Fargo & Co., American Express Co. and US Bancorp.

Fed chairman: Markets still under “extraordinary stress”

WASHINGTON - Federal Reserve Chairman Ben Bernanke told Congress Wednesday that global financial markets remain under "extraordinary stress" and that worsening conditions could further jeopardize the already troubled U.S. economy.

Bernanke and his Fed associates are fighting the biggest financial debacle since the Great Depression. Bernanke has been trying to reassure the country that the Fed will "act as needed" to provide relief. Some analysts think interest rates might be lowered again soon. The Fed has held them at 2 percent for three straight meetings.

The Fed chief appeared much more concerned about the stumbling economy right now than about the prospects of inflation getting out of control. The slowing economy should cause inflation to moderate later this year and next, he said.

In the second half of the year, consumers are expected to rein in their spending as unemployment rises, paychecks shrink and the energizing impact of the government's tax rebates disappears, Bernanke said.

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