Bush: 250-billion-dollar infusion joins global move
US President George W Bush Tuesday said the US government's infusion of 250 billion dollars into the American banking sector was part of a systematic global strategy to calm markets and ensure "growth and prosperity."
The announcement followed coordinated moves by key European governments since the weekend to inject unprecedented amounts of state cash into their reeling banks, reported dpa.
In the aftermath, stock markets around the world rallied with huge gains on Monday, with the rises continuing on Tuesday.
"Nations around the world are working together to overcome this challenge, and with confidence and determination, we will return our economies to the path of growth and prosperity," Bush said.
The move follows weeks of unprecedented stock market volatility as the US government, followed by individual European and other governments, tried desperately to stem losses from the collapse of the housing bubble with patchwork solutions.
Even the passage more than a week ago of the US government's 700- billion-dollar financial rescue plan failed to halt the plunge or free up credit, and Tuesday's announcement marked a reversal from US Treasury Secretary Henry Paulson's opposition to buying up bank stock.
Under the newest plan, 250 billion dollars of the rescue money will be used to buy equity shares in banks.
"New capital will help healthy banks continue making loans to businesses and consumers. And this new capital will help struggling banks fill the hole created by losses during the financial crisis, so they can resume lending and help spur job creation and economic growth," Bush said.
Banks would be expected to buy back the shares as soon as they can "raise capital from private investors."
Other steps call for the government's insurance programme for personal bank deposits to be expanded to cover new debt issued by insured banks and accounts used primarily by small businesses to cover day-to-day operations.
In addition, the US central bank, the Federal Reserve, was preparing to serve as "buyer of last resort" for commercial paper that enables American businesses to meet payrolls and purchase inventory, Bush said.
Bush cautioned that it would take some time until all the state measures towards stabilizing the financial sector and economy would have their full effect.
According to US media reports, the government buy-in would include nine of the largest financial concerns including Citigroup, Bank of America and JP Morgan Chase. The broadcaster CNBC said that the state might potentially buy in to thousands of banks.
Bush's announcement follows the concerted actions announced by several European governments on Monday for massive financial infusions to shore up the financial sector. In the aftermath, stock markets around the world rallied with huge gains on Monday, with the rises continuing on Tuesday.