WASHINGTON, Feb 14 (Reuters) - The U.S. Congress passed a $787 billion stimulus plan to jump-start the economy today, as G7 finance chiefs vowed to ward off the specter of protectionism arising from deepening global recession.
The U.S. package of government spending and tax cuts aimed at reviving the world's largest economy cleared both chambers of Congress, overcoming the resistance of Republicans who sought more tax breaks. President Barack Obama is expected to sign the bill into law soon.
Its approval failed to dispel pessimism on Wall Street, where persistent worries about the health of the banking sector this week have driven stock prices down by about 5 percent.
Markets were buoyed earlier by hopes that governments were coming up with measures to deal with the crisis and a plan President Barack Obama will announce on Wednesday to stem home foreclosures and stabilize the battered U.S. housing sector.
But a report by Britain's Lloyds Banking Group that its HBOS subsidiary lost 8.5 billion pounds ($12.28 billion) last year renewed fears about the financial system.
U.S. stocks stumbled in volatile trading, closing 1 percent down. The Dow Jones Industrial Average ended the week 5.2 percent lower, its worst one-week performance since Nov. 20.
But shares of some big manufacturing companies gained on expectations they will benefit from the U.S. stimulus plan.
U.S. oil futures, after a five-day losing streak, jumped 10 percent on hopes the stimulus package could pull the economy out of a 13-month recession and restore domestic demand. The bill aims to create or save 3.5 million jobs.
Investors remain jittery about U.S. Treasury Secretary Timothy Geithner's $1 trillion bank rescue plan and, lacking details, they wonder how it would relieve banks of money-losing assets at the root of the financial crisis that spread round the world. The biggest American banks agreed on Wednesday to foreclosure moratoriums for at least a few weeks until the U.S. government launches an aid programme for troubled homeowners using $50 billion included in Geithner's bank rescue package.
There is likely more pain to come. The U.S. economy will shrink a whopping 5.2 percent in the first quarter, its worst performance since 1982, according to a survey published by the Philadelphia Federal Reserve.
FACTBOX
A $787 billion stimulus plan would represent about 5.5 percent of the $14.3 trillion U.S. economy.
It is about 1.7 times the size of the largest U.S. budget deficit in history -- $455 billion -- recorded in fiscal 2008.
If it were given directly to Americans, rather than through a mixture of tax cuts and government spending aimed at upgrading infrastructure, it would be about $2,600 for every man, woman and child in the United States.
Obama's $787 billion plan is roughly 1.3 times the cost of the Iraq war so far, based on a bill that now stands at $595 billion, according to the National Priorities Project, a private non-profit group.
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