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President Bush unveils bank bail-out plans

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Date: Tuesday 14 Oct 2008

LONDON (ShareCast) - US President George W. Bush confirmed that America will emulate Britain by part nationalising its banks.

The US government will spend up to $250bn to buy stakes in nine of its biggest banks to restore faith in the US banking system. President Bush said the move was “not intended to take over the free market but to preserve it".

"It will help healthy banks to keep making loans to homes and businesses, and help struggling banks to fill the holes created by the financial crisis," he added.

Bush also extended a federal deposit insurance to cover all small-business deposits.

The $250bn injection announced by Bush today will come from the $700bn Wall Street bailout package already agreed by Congress.

Initially the plan was to mop up "toxic" sub-prime mortgage debt from lenders but the scheme will now emulate the plan announced by Gordon Brown for British banks; part renationalise banks with a package of loan guarantees.

US Treasury Secretary Hank Paulson said the banks should use the money to drive economic growth. "The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it,” he said.

"In recent weeks, the American people have felt the effects of a frozen financial system. They have seen reduced values in their retirement and investment accounts. They have worried about meeting payrolls and they have worried about losing their jobs ... without confidence that their most basic financial needs will be met, Americans lose confidence in our economy, and this is unacceptable," added Paulson

Yesterday, representatives from America's biggest financial institutions had an emergency meeting with Paulson to thrash out a deal.

The nine companies thought to have taken up the scheme are: Citigroup, Goldman Sachs, Wells Fargo, JPMorgan Chase, Bank of America, Merrill Lynch, Morgan Stanley, State Street and Bank of New York Mellon.

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