US government to take stakes in banks, Paulson says
The US government plans to take ownership stakes in banks in a fresh bid to restore confidence in financial markets, Treasury Secretary Henry Paulson said Friday, according to dpa.
The dramatic step comes as part of the 700-billion-dollar rescue package passed by Congress last week that gave the government broad new powers to buy up soured mortgage assets from troubled banks in the United States.
"We are developing strategies to use the authority to purchase and insure mortgage assets and to purchase equity in financial institutions, as deemed necessary to promote financial market stability," Paulson said after a meeting of the Group of Seven industrial nations in Washington.
Despite the plan to buy up stocks, Paulson said the government would not expect to get any voting rights over the banks' decisions.
"Such a programme would be designed to encourage the raising of new private capital to complement public capital," he said.
President George W Bush launched the largest US government intervention in history with his bail-out package to stave off further economic damage caused by the crumbling financial industry.
The crisis has sparked a historic sell-off on Wall Street and around the world.
The G7 finance ministers and central bank heads agreed to use "all necessary tools" to restore stability to financial markets in their own economies, after their meeting in Washington Friday.