bush administration ponders more socialist bank ownership

U.S. administration ponders taking part ownership in banks
Published: Thursday, October 9, 2008 | 12:43 PM ET

WASHINGTON - News that the Bush administration is considering taking part ownership in a number of U.S. banks helped restore a relative calm over global financial markets Thursday.

The aim of such a move would be to thaw the lending freeze that threatens to push the world's economy into recession. It comes after rampant fear about the global economy sent investors scurrying on Tuesday for safety in U.S. government securities despite an orchestrated round of rate cuts by the world's central banks.

Investors also were hoping that selling, which gave the Dow its ninth straight day of losses, was overdone. Wall Street began the day higher, but then slid after declines in some blue chip names like General Motors Corp. weighed on the markets.

In an effort to show that governments around the world were focusing intently on ways to resolve the crisis, the administration announced that President Bush would meet with finance officials from the Group of Seven major industrial countries at the White House on Saturday.

"The president will have the opportunity to hear directly from the finance ministers about how the financial crisis is affecting their respective economies and the steps they are taking to deal with these challenges both individually and collectively," presidential press secretary Dana Perino told reporters.

Perino said Bush would stress "the importance of nations working in a co-ordinated way to address the crisis while respecting the different conditions in each economy."

An administration official, who spoke late Tuesday on condition of anonymity because no decision has been made, said the US$700-billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return.

Treasury Secretary Henry Paulson told reporters that Treasury was moving quickly to implement the rescue effort and he specifically mentioned reviewing ways to bolster the capital of banks.

"We will use all the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size," Paulson said at a Wednesday news conference.

His statements came on the heels of Britain's move to pour cash into troubled banks in exchange for stakes in them - a partial nationalization.

Asked whether he would try something like the British plan, Paulson said: "We have a broad range of authorities and tools. ... We've emphasized the purchase of liquid assets, but we have a broad range of authorities. And I'm confident we have the authorities we need to work with going forward."

The Federal Reserve on Wednesday cut its target for the benchmark rate on overnight loans between banks to 1.5 per cent. The cut from 2 per cent took the rate to its lowest level in more than four years.

But all eyes are on now on Wall Street, where investors hope markets are getting closer to finding a bottom after the worst five-day rout since 1987. On Wednesday, the Dow gave up 189 points to close at - and is now down about 35 per cent from its high of 14,164.53 reached exactly one year ago.

In midmorning trading, the Dow Jones industrial average fell almost 1 per cent. GM was the biggest decliner in the Dow.

Demand for short-term Treasurys waned, with the yield on the three-month Treasury bill, which moves opposite its price, rising to 0.69 per cent from 0.63 per cent late Wednesday. Longer term debt also fell, with the yield on the 10-year note rising to 3.74 per cent from 3.65 per cent late Wednesday.

"Demand for short-term Treasurys waned, with the yield on the three-month Treasury bill, which moves opposite its price, rising to 0.69 per cent from 0.63 per cent late Wednesday. Longer term debt also fell"

- i don't understand: if the demand for treasury debt is decreasing, where are they planning to get the cash for this latest socialist intervention?


"we have a broad range of authorities. And I'm confident we have the authorities we need to work with going forward."

- oh that explains everything...hank paulson has a broad range of authorities...does he intend to print the money, or just pull it out of his ass?

What amazes me is where are all the fiscally responsible conservatives right now? They should be screaming bloody murder about socializing the banking industry and the stock market. It just goes to show you there really are no differences between the 2 parties any more.