The federal government announced today that it will buy ownership stakes in several major banks, including a $25 billion stake in Bank of America, which is one of the Tribe's major bankers.
Treasury Secretary Henry Paulson said, "We regret having to take these actions. Today's actions are not what we ever wanted to do — but today's actions are what we must do to restore confidence to our financial system."
The feds move toward equity (ownership) positions in several major banks is part of the effort to free up credit and will become part of the $700 billion rescue plan announced in recent weeks to help the banking industry. In what President Bush called an unwelcome choice of partial nationalization of the U.S. banking industry, $250 billion of the $700 billion rescue plan will go toward buying ownership stakes in some banks.
It has been reported that several banks have already agreed to a $125 billion of investment infusion by the federal government while the other $125 billion will go to small banks and thrifts. The major banks and the amounts to be invested by the federal goverment are: Bank of America ($25 billion), Citigroup ($25 billion), JP Morgan ($25 billion), Wells Fargo ($25 billion), Goldman Sachs ($10 billion), Morgan Stanley ($10 billion), Bank of New York Mellon ($2-3 billion), and State Street ($2-3 billion).
"By participating in these programs, these institutions, along with thousands of others to come, will have enhanced capacity to perform their vital function of lending to U.S. consumers and businesses and promoting economic growth. They have also committed to continued aggressive actions to prevent unnecessary foreclosures and preserve homeownership." the Federal Reserve said in a press release.
One of the recipients, the Bank of New York Mellon, was named custodian for the U.S. Treasury's $700 billion financial rescue plan. The New York-based bank will provide "custodial, accounting, auction-management and other infrastructure services needed to administer the complex portfolio of troubled assets the department will purchase," according to a U.S. Treasury statement. The Bank of New York Mellon currently has $23 trillion in custody assets.
Yesterday was the stock market's biggest one-day rally since the 1930's. The stock market indexes went up again this morning but retreated this afternoon.
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