Oct

22

Treasury Secy Says Banks Interested in Bailout

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The US Treasury Secretary announced on Monday that the federal proposal to invest $250 billion in financial institutions had evoked “interest from a broad group of banks of all sizes”.

Speaking at a Treasury Department news briefing, Henry Paulson Jr declared that the federal move to invest in banks had drawn a wide response from financial institutions across the country. This comes after several reports indicated last week that bank executives in US were unhappy with the federal emergency program and less than thrilled at the prospect of government intrusion in their companies.

Under the $250 billion bank rescue plan, the amount of federal funds a bank may receive is restricted to 3% of the institution’s “risk-weighted assets”. However, Treasury officials reiterated at Monday’s news briefing that enough money had been allocated to cover every financial institution eligible for the funding.

The next major step in the implementation of the bank rescue program will be to decide which banks will be allowed to participate. According to Treasury’s previous statements, it would prefer to invest only in those banks which are “healthy” and well-positioned to use the federal funds to issue new loans. Such banks need help because though they have adequate capital to get through, they may not be positioned to lend as widely as it is necessary to get the economy back on its tracks.

Oct

15

US Treasury to Invest in Nine Biggest Banks

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The United States Treasury is set to invest around $125 billion in nine of the country’s biggest banks as part of a series of measure intended to shore up investor confidence in the American financial system.

The Bush administration has directed the Treasury to acquire preferred shares in exchange of the cash injection into nine major US banks which are Citigroup Inc, Goldman Sachs Group Inc, Wells Fargo &Co, JPMorgan Chase & Co, Bank of America Corp, Merrill Lynch & Co, Morgan Stanley, State Street Corp as well as Bank of New York Mellon Corp.

The federal purchases into nine of the biggest banks form part of the $700 billion bank bail out plan approved by the US Congress last month. However this represents a new approach for Treasury Secretary Henry Paulson who had earlier promoted a mop up of loss-making mortgage-related assets. The need for a more urgent cash infusion was felt as banks strove to regain the confidence of investors, counterparties and customers after bad loans led to writedowns of more than $635 billion across the finance industry. Economic analysts expect that the substantial cash injections into the frontline banks will lead to a thaw in the credit market and lending will pick up again.