U.S. President George W. Bush Tuesday announced measures to implement a plan of action agreed by the Group of Seven (G7) major advanced countries and to strengthen the banking industry.
The government will use a portion of the US$700-billion financial rescue package to inject capital into banks by directly purchasing equity shares, Bush said in brief remarks in the Rose Garden of the White House.
He said the government will initially buy stocks in nine major U.S. banks under its US$250-billion purchase plan.
"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," Bush said.
Meanwhile, "effective immediately, the Federal Deposit Insurance Corporation (FDIC) will temporarily guarantee most new debt issued by insured banks," Bush announced.
He said that this will address one of the central problems plaguing the financial system -- banks have been unable to borrow money.
Created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s, the FDIC preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions.
Also, the FDIC will immediately and temporarily expand government insurance to cover all non-interest bearing transaction accounts. These accounts are used primarily by small businesses to cover day-to-day operations.
The fourth measure Bush announced is that the Federal Reserve will soon finalize work on a new program to serve as a buyer of last resort for commercial paper.
"This is a key source of short-term financing for American businesses and financial institutions," Bush said.
By unfreezing the market for commercial paper, he said, the U.S. central bank will help American businesses meet payroll, and purchase inventory, and invest to create jobs.
"These efforts are designed to directly benefit the American people by stabilizing the financial system and helping the economy recover," the president said.
The new measures the U.S. government is taking came after the G7 revealed a plan of action in Washington Friday to jointly fight the ongoing global financial crisis, pledging "to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth."
"Yesterday, leaders in Europe moved forward with this plan," Bush said. "They announced significant steps to inject capital into their financial system by purchasing equity in major banks."
And they announced a new effort to jumpstart lending by providing temporary government guarantees for bank loans, he said.
"These are wise and timely actions, and they have the full support of the United States," Bush said.
The G7 includes the United States, Japan, Britain, Germany, France Italy and Canada.
U.S. Treasury Secretary Henry Paulson, at a news conference a short time later, said "today's actions are what we must do to restore confidence in our financial system."
Fed Chairman Ben Bernanke welcomed all the new steps and said he believes they will help ease problems plaguing financial markets and threatening the economy.
(Xinhua News Agency October 15, 2008)