US president to use money from emergency funds
President Bush is today expected to unveil firm plans to use $250 billion worth of US taxpayer funds to seize stakes in nine of America’s biggest banks.
The funds will come from Washington’s $700 billion rescue fund.
The plans follow emergency talks in Washington convened yesterday between Henry Paulson, US Treasury Secretary, and America’s most important bankers.
It is not clear how much of federal money would be invested in each institution.
At the same time, the FDIC, the federal bank insurer, is expected to announce measures that will extend its guarantee of retail deposits to some types of low risk bank debt for a period of three years.
Such a bailout follows the lead of Gordon Brown who last weekend unveiled plans to take majority stakes in Royal Bank of Scotland and HBOS, and to inject £37 billion of capital into Lloyds TSB.
The move by the US Treasury throws light on last-minute negotiations to secure Japanese funding to protect the future of Morgan Stanley. The Times reports today that that Mitsubishi, the Tokyo-based bank, was able to agree to a $9 billion investment because of guarantees offered by Washington.
