The US Treasury has revealed that it is to use $250 billion of its $700 billion bail out to buy shares in nine major banks . The bailout was originally designed to buy bad debts from struggling banks, though a clause inserted into the final bill enables the government to buy shares in banks as they seek to encourage lending . The move has been labelled as unthinkably socialist – a view that has been acknowledged by Treasury Secretary Henry Paulson. Mr Paulson said, ‘Government owning a stake in any private US company is objectionable to most Americans, me included. Yet the alternative of leaving business and consumers without access to financing is totally unacceptable’.
President Bush defended the bail-out, claiming the measures were ‘not intended to take over the free market but to preserve it’. He revealed his hope that ‘this new capital will help healthy banks continue making loans to businesses and consumers. And this new capital will help struggling banks fill the hole created by losses during the financial crisis’.
Wall Street markets did experience an initial surge following the announcement, which sees the government buy shares in Bank of America, Bank of New York, Citigroup, Goldman Sachs, JPMorgan Chase, Mellon Corp., Merrill Lynch, Morgan Stanley, State Street Corp. and Wells Fargo.
US Government to Buy USD250 Billion of Shares in Nine Major Banks
US Government to Buy USD250 Billion of Shares in Nine Major Banks
Wed, 15 Oct 2008
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