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Bush to announce new details of bank rescue plan

(Agencies)
Updated: 2008-10-14 20:10

WASHINGTON - The Bush administration will spend $250 billion this year to purchase stock in banks and take a number of other bold steps in an effort to combat a global credit crisis that is threatening to push the country into a deep recession, industry and government officials say.

US President George W. Bush speaks next to Italian Prime Minister Silvio Berlusconi (not shown) in the Rose Garden of the White House in Washington, October 13, 2008. [Agencies]

President Bush was scheduled to announce the new initiatives early Tuesday after executives of the country's biggest banks were summoned to a remarkable meeting at the Treasury Department on Monday. Treasury Secretary Henry Paulson basically told the bank CEOs that they had to accept the government stock purchases for the good of the US economy.

The administration plans to spend $250 billion of the $700 billion government rescue program passed by Congress on Oct. 3 to make stock purchases this year. The first purchases will be in nine large banks, officials said. The industry and government officials spoke on condition of anonymity because the details were yet to be formally released.

The decision represents a remarkable turnaround for the $700 billion rescue program, already the largest bailout in US history. As the plan sped through Congress, the administration said the money was needed to purchase bad mortgage-related assets that are weighing on the books of financial institutions, never mentioning direct stock purchases.

However, as the financial crisis gained new intensity last week, sending US stocks down by a record amount, the administration decided to shift focus and adopt a bolder program modeled more along the lines of bank rescue efforts being put together in Britain and other European countries.

Major stock markets around the world surged higher Monday as traders began to hear of new actions being taken in Europe, where governments put $2.3 trillion on the line Monday in guarantees and other emergency measures to save banks there.

On Wall Street, the Dow Jones industrial average soared by a one-day record of 936 points. But all the stock gains came after staggering losses in the previous week and economists said more rough days can be expected until there are clearer signs that the credit crisis is lessening.

World markets soared for a second day Tuesday, led by a record 14 percent jump in Japan's benchmark Nikkei 225 index.

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