So, the world was coming to an end. ARMAGEDDON. The last days. Now, we find out that Treasury Secretary Paulson is planning to buy stakes in a wide range of banks within weeks as the credit freeze increasingly threatens to tip the U.S. economy into a deep recession, according to Bloomberg News. Apparently they are still noodling out exactly how this would work. So, in addition to troubled mortgage-backed securities from financial institutions, we're buying banks. We the people certainly are getting diversified. We have "weeks". Oh joy.
The article is below the fold. Makes me glad I saved my diary space for today.
From Bloomberg News:
I'm dropping some of it in here because it's absolutely evocative of gunsmoke on the horizon.
U.S. Treasury May Buy Stakes in Banks Within Weeks (Update1)
By Robert Schmidt and Rebecca Christie
Oct. 9 (Bloomberg) -- The government is planning to buy stakes in a wide range of banks within weeks as the credit freeze increasingly threatens to tip the U.S. economy into a deep recession.
Treasury Secretary Henry Paulson and top aides are still considering options on how the purchases would work, including having the government acquire preferred stock, two officials informed of the matter said.
The move would be a shift in emphasis in Paulson's original intention for the $700 billion bailout package passed by Congress last week. While the Treasury still aims to buy troubled mortgage-backed securities from financial institutions, a direct capital injection would offer more immediate relief.
``The Treasury is no longer looking for one silver bullet,'' said Steve Bartlett, president of the Financial Services Roundtable, which represents 100 of the biggest firms in the industry. ``They have to proceed on all fronts.''
The Treasury aide named to run the office that will implement the rescue package, Neel Kashkari, is scheduled to speak Oct. 13 in Washington on progress in putting plans together.
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Mid-sized banks including KeyCorp and Huntington Bancshares Inc. have plunged this month on concern the deepening credit crisis will cause the economy to contract and send loan defaults soaring. Cleveland-based Keycorp has slid 48 percent in the past week to $7.20 at 2:12 p.m. in New York Stock Exchange trading. Columbus, Ohio-based Huntington is down 30 percent the past three days, to $7.63.
There are 8,451 U.S. banks and thrifts with $13.3 trillion in assets whose deposits are insured by the Federal Deposit Insurance Corp., according to second-quarter data.
Reuters reported earlier that the Treasury would begin making capital injections as soon as the end of the month, citing an unnamed source.
To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net; Rebecca Christie in Washington at Rchristie4@bloomberg.net.
Last Updated: October 9, 2008 14:35 EDT