The federal government on Tuesday announced an extraordinary and historic direct investment in the nation's banks - the biggest bet ever made with taxpayer dollars on the U.S. financial system.
As a start, the Treasury will pump $250 billion into financial institutions. Nine of the nation's largest banks have already agreed to take the capital and in return will give preferred shares to taxpayers and accept limits on executive pay. Half of the money, or $125 billion, will go to the nine large banks.
"This is an essential short-term measure to assure the viability of America's banking system," President Bush said in comments outside the White House. "These measures are not intended to take over the free market, but to preserve it."
In addition, Bush made a formal request for an additional $100 billion to help out financial institutions. Congress authorized up to $700 billion as part of the financial system bailout enacted on Oct. 3, but it required the president to certify the need for any amount above the initial $250 billion.
The government can use the additional $100 billion to buy troubled assets held by firms or to make additional capital infusions into banks.
