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Bill to use public funds to rescue ailing banks clears House of Representatives

A bill to use public funds to rescue banks in financial trouble became law after being approved by the House of Councilors. The ruling Liberal Democratic and Komei parties and the opposition Democratic Party of Japan voted in favor.

The new law allows the Banks' Shareholdings Purchase Corporation (BSPC) to buy out corporate stocks held by banks along with bank stocks from business corporations.

If the prices of shares the BSPC is to purchase falls, taxpayers' money will be used to make up for any losses.

When the bill was discussed the previous day at the House of Councilors committee meeting, Japanese Communist Party Daimon Mikishi reiterated the JCP's opposition to the bill on the grounds that the bill, which is ostensibly aimed at stabilizing share prices, will only rescue financial institutions that incur huge amounts of unrealized losses.

Daimon pointed out that sharp declines in the real economy are causing stock market meltdowns and emphasized the need to prop up the economy by defending jobs, expanding and improving social programs, extending assistance to small- and medium-sized businesses, and revitalizing the nation's agriculture.

The public sector's intervention in the stock market may undermine the mechanism of the market-oriented economy, he warned.

Five out of six senior members in BSPC are heads of major banks, and 97 percent of the stocks the BSPC so far purchased were from ten banks affiliated with the three major Japanese banking groups.

- Akahata, March 4, 2009

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