World financial crisis

US to spend billions on buying into banks

Article published on the 2008-10-14 Latest update 2008-10-14 15:55 TU

U.S. Treasury Secretary Henry Paulson
(Photo: Reuters)

The US financial authorities announced on Tuesday that the government will buy equity stakes in banks in exchange for capital. Nine American banks (including Goldman Sachs, Citigroup, JPMorgan Chase) will give the government a stake in their business.

The US financial authorities announced on Tuesday that the government will buy equity stakes in banks in exchange for capital. A limit of 250 billion dollars has been set to buy into nine American banks (including Goldman Sachs, Citigroup, JPMorgan Chase).

The US government also said it will guarantee bank debt and interbank lending temporarily. It will also give unlimited insurance on some accounts. Treasury Secretary Henry Paulson said the move would "bolster public confidence" and would "stabilize liquidity (that is) necessary to support economic growth".

Speaking in the White House garden President Bush said of the moves to buy into US banks that the measures were not intended "to take over the free market, but to preserve it".

Also on Tuesday President Bush spoke to European leaders to discuss the ongoing efforts to stem the current financial crisis. He telephoned German Chancellor Angela Merkel, French President Nicolas Sarkozy and British Prime Minister Gordon Brown.

In Europe on Tuesday, markets closed having made gains for a second consecutive day.