America's bank recapitalisation plan

"America’s Treasury announces a package of equity injections and loan guarantees to save the banksWITH luck, the American government’s bank recapitalisation plan will save the financial system, but it is probably too late to save the economy from succumbing to the combined impact of shrinking wealth and the credit crunch.American officials unveiled a three-part rescue programme on Tuesday October 14th. Under the first part, the Treasury will inject as much as $250 billion into American banks, with roughly half initially going to nine big institutions. The capital would come in the form of non-voting preferred stock. Under the second part, the Federal Deposit Insurance Corporation (FDIC) would guarantee unsecured borrowing by banks for maturities of up to three-and-a-half years, at a relatively modest cost of 75 basis points. That would include interbank loans. Under the third part, the FDIC would guarantee without limit small-business bank deposits that do not pay interest. Also on Tuesday the Federal Reserve gave more details of its previously-announced commercial paper backstop programme, which should ease borrowing for big nonbanks, such as GE Capital. ..." (2008-10-14)
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