WASHINGTON - (AP) - President Bush on Tuesday announced a $250 billion plan by the government to directly buy shares in thenation's leading banks, saying the drastic steps were "notintended to take over the free market but to preserve it."
Nine major banks will participate initally including all of thecountry's largest institutions. Some of the big banks had to bepressured to participate in the program by Treasury Secretary HenryPaulson, who wanted healthy institutions that did not necessarilyneed capital from the government to go first as a way of removingany stigma that might be associated with banks getting bailouts.
Bush, in brief remarks in the Rose Garden of the White House,said the government will initially buy stocks in nine major U.S.banks.
"These efforts are designed to directly benefit the Americanpeople by stabilizing the financial system and helping the economyrecover," he said.
Paulson, at a news conference a short time later, said "today'sactions are what we must do to restore confidence in our financialsystem."
"We regret having to take these actions," said Paulson."Today's actions are not what we ever wanted to do - but today'sactions are what we must do to restore confidence to our financialsystem."
The Federal Reserve, meanwhile, announced Tuesday that it willbegin buying massive amounts of short-term debt on Oct. 27 - itslatest effort to break through a credit clog. The Fed is invokingDepression-era emergency powers to buy commercial paper - a crucialshort-term funding that many companies rely on to pay their workersand buy supplies. Last week the Fed said it intended to take theaction but didn't specify when.
Fed Chairman Ben Bernanke welcomed all the new steps and said hebelieves they will help ease problems plaguing financial marketsand threatening the economy. However, he also made clear thatpolicymakers would continue to take actions as needed to battle thecrisis.
"Our strategy will continue to evolve and be refined as weadapt to new developments and the inevitable set backs," he said."But we will not stand down until we have achieved our goals ofrepairing and reforming our financial system and thereby restoringprosperity to our economy." Click here to watch President Bush's announcement Click here to watch Treasury Secretary Paulson's news conference on the plan