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WASHINGTON: US President George W. Bush and his Treasury Secretary Henry Paulson were Tuesday to unveil details of a comprehensive financial rescue package that includes investing hundreds of billions of government dollars into several troubled banks.
In its boldest move yet to fend off a mounting financial crisis, the US Treasury is expected to announce a plan to invest US$250 billion in potentially thousands of American banks, including the nation's largest.
Details of the plan , aimed at injecting massive liquidity into a system which has come under critical pressure in recent weeks, are expected to be unveiled Tuesday in addresses by Bush, Paulson and US Federal Reserve chairman Ben Bernanke.
Bush is due to speak at 8:05 am (1205 GMT) from the Rose Garden at the White House after holding an early meeting with a working group on financial markets, it was announced late Monday.
Earlier in the day Bush vowed to pursue "responsible, decisive action to restore credit and stability and return to vigorous growth."
Paulson is to speak at the Treasury Department at 8:30 am (1230 GMT) and unveil details of actions to shore up public confidence following weeks of global economic turmoil, the Treasury Department said in a statement. Bernanke is scheduled to attend the Treasury briefing as well.
The speeches take place before US markets open at 9:30 am (1330 GMT).
According to the Treasury, Paulson will address "a series of comprehensive actions to strengthen public confidence in our financial institutions and restore functioning of our credit markets."
The announcements came on the day US stocks posted their largest ever one-day point gain, following their worst week ever, and markets around the world rallied as several governments including in the eurozone announced decisive action to shore up the banking system.
They also come as Neel Kashkari, the newly-appointed Treasury Department official tasked with managing the US$700-billion US rescue package, unveiled plans for the US government to buy stakes in several banks, in the latest move to combat the worst global financial crisis since the 1930s.
The Wall Street Journal reported Monday on its website, citing people familiar with the matter, that the plan calls for the Treasury to take about US$250 billion in equity stakes in potentially thousands of banks across the country including several of the nation's largest banking institutions.
According to The New York Times, Citigroup and JPMorgan Chase were told they would receive injections of US$25 billion each; Bank of America and Wells Fargo would get US$20 billion each; Goldman Sachs and Morgan Stanley would each receive US$10 billion; and Bank of New York Mellon and State Street were each due to get two to three billion.
Paulson reportedly outlined the plan Monday in a meeting with several bank representatives.
The new plan is also expected to provide a Federal Deposit Insurance Corporation guarantee to inter-bank lending, the overnight or short-term loans which banks normally give one another and which have evaporated amid fears of lending to an institution that may be unable to repay.
The shutdown of such lending has helped fuel a global credit crunch that threatens to turn into a global recession.
Under the US$700-billion Troubled Assets Relief Program approved by Congress early this month, the government is authorised to take exceptional measures, including the purchase of toxic mortgage-related assets from ailing financial institutions in a bid to unclog frozen credit flows.
Some economists have criticised Paulson for initially proposing buying up the soured assets, arguing that directly injecting capital into troubled firms would be more effective in unblocking credit, the lifeblood of the US economy.
- AFP/yb
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