October 14, 2008
Posted: October 14th, 2008 07:50 AM ET
President Bush announced a new plan to help 'struggling banks' Tuesday.'
WASHINGTON (CNN) - President Bush announced Tuesday that part of the $700 billion financial bailout package will be used to inject capital into banks by buying their shares. "This new capital will help struggling banks to fill the hole filled by crisis during the time we are in," he said. "This is a short-term measure to insure the viablilty of America's banking system." According to a person briefed on the proposal, the Treasury Department will invest as much as $250 billion of the $700 billion plan in banks. Watch: Bailout Plan Reaction Bush also announced that the Federal Deposit Insurance Corporation will "temporarily guarantee most new debt" issued by banks that are FDIC insured. That action will take effect immediately. "This will address one of the central problems plaguing our financial system - banks have been unable to borrow money and that has constricted their ability to lend to consumer and businesses," Bush said. "When money flows freely between banks, it will make it easy for Americans to borrow money for homes and cars."
The government, through the FDIC, will also immediately and temporarily insure non-interest-bearing transaction accounts which are used mainly by small businesses "to cover day-to-day operations." "By insuring every dollar in these accounts, we will give small business owners piece of mind and bring greater stability to the banking system," Bush said. Bush also announced that the Federal Reserve is finalizing a plan in which it would be the "buyer of last resort for commercial paper." "By unfreezing the market for commercial paper, the Federal Reserve will help American businesses meet payroll and purchase inventory and invest to create jobs," he said. Filed under: President Bush
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