Rescue Plan Details Unveiled by Milota Sidorova

American government has unveiled more details from long time desired rescue plan package. Just before opening markets that stood up great great optimism on Monday, president Bush announced the first $125 were on the way to cash boxes of nine biggest banks of the U.S.
They will receive amount up to $25 billion each even if they have survived the crunch without significant damages.
First in the line was Bank of New York Mellow that has already asked to sell the Treasury $3 billion share. Just like with the rest of the cases with Goldman Sachs, Morgan Stanley, JP Morgan Chase, Bank of America, troubled Merrill Lynch, Citigroup, Wells Fargo&Co and State Street Corp, the government is going to purchase a stake within the companies.

It’s not a surprise that Americans don’t like the private sector partially owned and limited by the state, so the administration had to come up with compromise. The stakes the government is going to buy will not be an object of vote either election, but they will give them a priority in getting paid back if company doesn’t success and fails. Banks will also have to accept limitations on executive compensation.

If everything goes well, taxpayers will be free to purchase government share and have share on future earnings either a chance to purchase them back for much higher price.
State Treasury Secretary Paulson urged to inject even healthy companies to remove ‘stigma’ away from the forehead of American economy.
Government shares will cash 5 percent annual dividend and will rise up to 9 percent after 5 years – this step should prevent the companies relying on federal help for a very long time.

Yet, we have spoken just of few healthy financial colosses. By the end of 2008 second $125 billion should reach accounts of smaller American banks. There should be also amount of $100 billion to cover bad assets and resident package of $350 billion presumably spent upon discretion of the next president.

Despite a long term run and lots of expectations, the plan hasn’t boosted investors’ confidence and the markets were falling slightly yesterday. Dow Jones dropped 77 points after rocketing 936 point increase. LIBOR or bank-to-bank lending index has been slowing slightly on Tuesday signing the banks still prevent them from unprecedented loans.

Along with a plan, there came two major updates as well. First of all it was a launch of an insurance fund temporarily guaranteeing new issues of bank debts or literally – full protection for the money in case of bankruptcy. FDIC also promised unlimited deposit insurance for non-interest bearing accounts used by business to cover payrolls and other expenses.
The final of the last federal steps to boost the economy should come on 27 Oct buying vast amounts of short-term debt.



related story: http://news.yahoo.com/s/ap/20081014/ap_on_bi_ge/financial_meltdown;_ylt=AiMCvyjKfPBd3ZF7c7IVVSus0NUE

by Milota Sidorova for PocketNews (http://pocketnews.tv)

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