Bailout plan revamped to give banks more protection

Source: Agencies  |   2008-10-14  |     ONLINE EDITION

THE Bush administration plans to spend as much as US$250 billion of the US$700 billion bailout buying stock in private banks, greatly expanding protections for the US financial system out of deep unease over the faltering economy, industry and government officials said last night. President George W. Bush planned to announce details this morning.

Agreement on the plan came after a remarkable US Treasury Department meeting between top government economic officials and executives of the nation's largest banks to revamp the most costly financial rescue in the nation's history.

The plan also would provide a way for the government to insure loans that banks make to each other, a critical part of the credit system that has become frozen and put many businesses in peril.

Earlier Monday, stocks soared around the world in response to dramatic government economic relief efforts in the United States and elsewhere and the possibility of the even bolder American action.

Last night, the Treasury Department said the administration had decided on "comprehensive actions" to bolster public confidence in the nation's financial system. Bush was to be briefed early Tuesday by economic advisers and then announce the plan, which Treasury said was designed to "restore functioning of our credit markets."

While the administration refused to provide details in advance, two officials with knowledge of the plan said it would include billions of dollars in spending by the government to buy stock in banks as a way of providing desperately needed money so they could resume more normal lending. Both officials spoke on condition of anonymity because the details were yet to be formally released.