Bush Announces $250 Billion Plan To Buy Stakes In Biggest U.S. Banks

October 14, 2008 9:50 a.m. EST

Washington, D.C. (AHN) - President George W. Bush unveiled an unprecedented plan on Tuesday to use $250 billion to buy shares from some of the nation's biggest banks.

Speaking from the White House Rose Garden, Bush said the plan, which is part of the $700 billion financial bailout he signed into law earlier this month, is an "essential short-term" measure to keep the nation's banking system viable. He added that the plan was part of several measures in accordance with the coordinated effort of G7 nations to address the deepening global financial crisis.

"This 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," the President said.

Bush also announced that the Federal Deposit Insurance Corporation (FDIC) will "temporarily guarantee" most new debt issued by insured banks as well as non-interest-bearing accounts. He added that the Federal Reserve is about to complete details of a program that will allow it to "serve as a 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.

"The measures I have announced today are the latest steps in this systematic approach to address the crisis... I recognize that the action leaders are taking here in Washington and in European capitals can seem distant from those concerns. But these efforts are designed to directly benefit the American people by stabilizing our overall financial system and helping our economy recover," Bush added.

The President made his remarks after meeting with his working group on financial markets but before markets opened at 9:30 am ET.

Treasury Secretary Henry Paulson, who is scheduled to speak about the plan in detail in a Tuesday press conference, also met with top executives of the nation's largest banks on Monday to brief them about the banking rescue. The Dow Jones rose on Monday more than 900 points to 9,388, the largest single-day gain. Global shares similarly rebounded in anticipation of the White House's announcement.