Earlier this week their have been numerous reports on the proposed rescue package for American banks, worth $700 billion, which was launched by the US Government over the weekend, but then rejected by congress in a vote which took place on Monday this week.

The proposal was for the US Government to buy up the banks’ bad debts which they have accumulated on their mortgage and homeowner loan books, in exchange for a share of each of the institutions involved. This plan would hopefully relieve some of the liquidity problems being faced by many of the American lenders and allow the housing and homeowner loan market to move forward.

After the shock rejection of this plan on Monday, the US Government has developed an amended version of the original proposal, which has now been approved by the US Senate by 74 votes to 25.

The new proposal was described by George Bush as “different and improved” and now includes a better level of insurance for the Government and less of a financial burden for the American tax payer. The amendment has now been passed to the House of Representatives for their approval and they are expected to vote on the bill as a matter of urgency, possibly even today (Friday).

Senator Chris Dodd said “The legislation gives the Treasury Secretary the authority to respond quickly and forcibly to the current crisis, while creating strong protections for American taxpayers, helping to preserve the American dream of home ownership and cracking down on excessive compensation for corporate executives who made bad decisions.”

If the proposals are passed it will be positive news for the housing and bad credit loan markets, not only in the US, but worldwide and will hopefully restore some level of confidence to the markets.

Meanwhile, it is expected that France is about to come up with a similar scheme, worth 300 billion Euro, to bail out the European banking sector.