US takes up Brown bank rescue plan
US takes up Brown bank rescue plan
Monday 13th October 2008
The US is to follow the UK's bail out plan by buying shares in banks and other financial institutions.Earlier today, Gordon Brown hinted – after talks with George Bush – that the Treasury secretary Henry Paulson's $700 billion bailout plan would be revised to allow the US to buy into firms.
The US bailout was originally designed to buy up toxic mortgage-based assets that were causing a loss of confidence in the financial institutions.
The move to buying into firms – and part-nationalising them – is aimed at boosting their capital levels.
Treasury Assistant Secretary Neel Kashkari, who is in charge of overseeing the $700 billion Troubled Asset Relief Programme (Tarp), said the US taxpayer will only buy into "healthy banks".
"We are designing a standardised programme to purchase equity in a broad array of financial institutions,'' said Mr Kashkari.
"The equity purchase program will be voluntary and designed with attractive terms to encourage participation from healthy institutions.''
He added: "The Emergency Economic Stabilisation Act of 2008…. gives the Treasury Secretary broad and flexible authority to purchase and insure mortgage assets, and to purchase any other financial instrument…. he deems necessary to stabilise our financial markets - including equity securities."
US authorities are also now mulling over guaranteeing interbank loans – which forms part of the UK rescue plans and is now being taken on over Europe.
"Our goal is to use the multiple tools enabled by the TARP to attack the capital and troubled asset problem from multiple directions," Mr Kashkari said.
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