US celebrates but Soros slams rescue deal as ill-conceived

In a crucial vote in the early hours, the US Senate backed the plan by 74 votes to 25 after more than $100 billion of tax breaks was added to the rescue package in a bid to win over potential opponents.

The senators' strong endorsement has raised hopes that the US House of Representatives - which stunned the financial world by rejecting the original bail-out this week - will now support the amended plan.

The improved prospects for the salvage deal - which has come under fire from large sections of the American public who see it as a bail-out for greedy bankers - are expected to help stabilise the world's stock markets.

But Mr Soros, the billionaire investor who earned a fortune when the pound fell on Black Wednesday in 1992, warned that the US government had taken the wrong approach.

"The plan is ill-conceived or not conceived at all," he said.

Mr Soros suggested that the result of the current package - under which US government money will be used to buy failing mortgage assets from the banks - would be that taxpayers would end up paying too much for the bad debts and claimed it would have been preferable to allow some institutions to go bust.

He said private capital could then have been used to refinance the banks and that if this failed to generate enough cash, the US Treasury should have bought shares in the banks so that taxpayers could share in any future gains from the bail-out.

"If administered properly, this recapitalisation would be enough to let the banks lend again," he added.

The attack by Mr Soros failed to damp spirits in Washington, however, as political leaders from all sides welcomed the Senate's backing for the revised bailout. President George Bush applauded the Senate for its "strong bipartisan vote" and said the success of the deal was vital for the financial security of every American.

He urged the House of Representatives, which rejected the original package on Monday, to reverse its stance when it considers the amended plan and who has faced heavy criticism for his handling of the crisis, also expressed optimism. "This sends a positive signal that we stand ready to protect the US economy," he said.

The Senate's backing for the bailout followed a concerted drive by political leaders from both parties to secure a vote in favour. US presidential rivals, senators John McCain and Barack Obama shook hands on the floor of the Senate before they both backed the Bill, as did Delaware senator Joe Biden, the Democratic vice-presidential nominee.

During the debate in the Senate, Democratic presidential nominee Mr Obama said: "What it means is that if we don't act it will be harder for Americans to get a mortgage for their home, or loans they need to buy a car, or send their children to college." Republican senator Mitch McConnell, the Senate minority leader, said the vote showed the Senate "at its finest" and that the deal's endorsement was an important moment for America as it faced a "major" crisis. He added: "It doesn't entirely solve the problem, but it begins to move us in the direction of getting the American economy back where it needs to be very soon.

"This was a measure that was much needed, to unfreeze the credit markets and get America's economy working again." The bail-out will be sent back to the House of Representatives - the lower house of Congress - and a new vote is expected to take place on Friday. The $100 billion of tax breaks are expected to win over some Republican critics, who formed the bulk of the opposition when the original legislation was voted down on Monday, although the same measures could swing some Democrat supporters against the amended package.