U.S. to Pump $250 Billion Directly Into Banks

Los Angeles Times (10/14/08); Reynolds, Maura
In response to increasing volatility in stock markets worldwide, the Bush administration will announce plans on Oct. 14 to pump $250 billion directly into nine major banks--including Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley. Additionally, the plan will involve allowing the Federal Deposit Insurance Corp. to insure senior preferred bank debt, with both aspects of the plan aiming to recapitalize the banks and spur lending among them. The government would be given preferred nonvoting shares of the banks' stock, which ultimately would be sold at a profit. While the government still expects to purchase billions in troubled mortgage-backed securities, experts say that plan could take months to commence and likely will be pushed aside as the government focuses on the direct capital infusion.