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First batch of bailout money for US banks moving soon

(Agencies)
Updated: 2008-10-28 09:11

WASHINGTON – The US government prepared Monday to move the first batch of bailout money to banks as fretful world markets plunged again.

The Capital One headquarters in McLean, Virginia, August 21, 2007. [Agencies]

Wall Street ended with a big drop at the closing bell, sending the Dow Jones industrials to their lowest close since the financial meltdown began.

The Treasury Department said it would start moving $125 billion to nine major banks this week by buying ownership stakes, the first big transfer since the $700 billion bailout package was passed early this month.

Assistant Treasury Secretary David Nason said the infusion would go to the largest banks in the nation, including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.

Related readings:  Companies start competing for bailout money  US Treasury plans $125b bank investment  US bank buy-in no economic quick-fix  ILO says global crisis to cost 20 million jobs

A group of smaller but significant regional banks, including Capital One Financial and SunTrust Banks, began announcing their own preliminary deals with Treasury for another $125 billion. That money should be released as soon as paperwork is finished.

The Fed also began a major program to buy up the short-term debt, known as commercial paper, that businesses use to pay for everyday expenses and salaries. Lending, the lifeblood of the economy, froze up after the collapse of investment house Lehman Brothers in mid-September and has thawed agonizingly slowly since.

On Wall Street, buying and selling that was halfhearted by the standards of the past month had major averages drifting higher and lower throughout the day. Then stocks plunged in the final 10 minutes of trading.

The Dow Jones industrials finished the day down 203 points, or 2.4 percent, closing at the 8,176 level — their lowest close of the year. Remarkably, it was the 28th time in the 31 trading sessions since the financial meltdown began that the Dow has moved triple digits for the day.

But the carnage was worse elsewhere on another day when investors worried about a looming worldwide recession. Major stock markets in Hong Kong, Tokyo, Britain, France and Germany dropped sharply earlier in the day. Tokyo's Nikkei 225 index closed at its lowest level in 26 years.

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