Bankruptcy

Fed to Buy Interests in Banks, Healthy and Unhealthy

By J. Michael McBride

In yet another “not since the great depression” moments, the Federal Government, the Treasury Dept. In this instance, announced that it will use some of the money provided for in the bailout (200 billion out of the 700 billion, I gather) to buy interests in banks. This is part of an ongoing effort to unfreeze the capital markets. “The government is planning to buy stakes in a wide range of banks within weeks as the credit freeze increasingly threatens to tip the U.S. economy into a deep recession.

Treasury Secretary Henry Paulson and top aides are still considering options on how the purchases would work, including having the government acquire preferred stock, two officials informed of the matter said.

The move would be a shift in emphasis in Paulson's original intention for the $700 billion bailout package passed by Congress last week. While the Treasury still aims to buy troubled mortgage-backed securities from financial institutions, a direct capital injection would offer more immediate relief.”

Here is a link to one story on this topic:
http://www.newsday.com/news/local/wire/newyork/ny-bc-ny--nationaldebtclock1008oct08,0,3534534.story

Michael

Full post as published by Texas Lawyer Blog on October 09, 2008 (boomark / email).