US to Invest in Nation’s Largest Banksby Tim Manni
President Bush announced this morning, among other initiatives, that the US Government plans on injecting cash into some of the nation’s largest financial institutions, following what seems to be a global effort after the Group of Seven concluded their meetings in Washington, DC. As part of the $700 billion rescue, the US will spend up to $250 billion on the purchase of equity shares from the banks. The move — one that both Bush and Treasury Secretary Henry Paulson stressed as temporary — is designed to re-establish confidence, increase lending, and restore the natural monetary flow of order to the US banking system.
Stocks are expected to once again react positively, after yesterday’s largest one-day gain since 1933. “And the program is carefully designed to encourage banks to buy these shares back from the government when the markets stabilize and they can raise capital from private investors,” said President Bush.
According to the Wall Street Journal, “The government is set to buy preferred equity stakes in Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. — including the soon-to-be acquired Merrill Lynch — Citigroup Inc., Wells Fargo & Co., Bank of New York Mellon and State Street Corp., according to people familiar with the matter.”