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Saturday 14th of February 2009
October 14, 2008

US reveals banking bailout package


by Kay Murchie
”US

Stock markets throughout the world have been awaiting details of America’s rescue package after the UK and Europe have already announced plans to tackle the financial crisis.

The US has announced a $250 billion (£143 billion) scheme which will see the Government purchase stakes in the country’s largest banks in an attempt to restore confidence in the banking industry.

Furthermore, there are plans for US federal authorities to insure most new debt issued by US banks in the short-term.

The deal is similar to that unveiled by the UK and European nations in a bid to prevent financial meltdown.

Sources close to the situation believe that the Government is expected to buy equity stakes in Goldman Sachs Group Inc, Morgan Stanley, JP Morgan Chase & Co, Bank of America Corp, Citigroup Inc, Wells Fargo & Co, Bank of New York Mellon and State Street Corp.

These larger financial institutions will receive half of the $250 billion while the other half will go to smaller banks and lenders which agree to the program of capital for equity which includes restrictions on executive pay and bonuses.

The $250 billion investment is to come from the $700 billion (£380 billion) bailout fund set aside by Congress.

Following the news, the Dow Jones index rose by only 39 points as London’s FTSE 100 index closed 2.9% up. Stock markets in Europe saw similar rises with Germany’s Dax and France’s Cac 40 both closed up around 2.5%.

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