Update at 9:11 a.m. ET: Here's a joint statement from the Treasury Department, Federal Reserve and FDIC.
Update at 8:46 a.m. ET: Paulson says the Treasury Department is buying equity stakes in a "wide variety of banks and thrifts" so they can provide credit.
Institutions that sell stock to the government will accept restrictions on executive compensation and "strengthen their efforts to help struggling homeowners who can afford their homes avoid foreclosure."
Here's the full text of Paulson's statement.
Update at 8:32 a.m. ET: Here's the full text of Bush's statement.
Update at 8:23 a.m. ET: The Washington Post describes the new approach as a "significant reversal" that Paulson had opposed just weeks ago.
Yesterday, Paulson "told the executives that for the good of the nation -- patriotism was specifically invoked, according to a person briefed on the discussions -- they would each have to sell the government a stake in their companies," the Post says. "Representatives of several banks underscored after the meeting that they did not need the government's money but said they cooperated out of obligation and to help heal the financial system."
Update at 8:12 a.m. ET: Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke are scheduled to brief reporters at 8:30 a.m. ET. Click here to watch a live feed from the Treasury Department.
While we're waiting, here's how The Wall Street Journal described the banking portion of the government's bailout plan:
Treasury will buy $25 billion in preferred stock in Bank of America -- including Merrill Lynch -- as well as J.P. Morgan and Citigroup; between $20 billion and $25 billion in Wells Fargo; $10 billion in Goldman and Morgan Stanley; $3 billion in Bank of New York Mellon; and about $2 billion in State Street.
The government will purchase preferred stock, an equity investment designed to avoid hurting existing shareholders and deterring new ones. Such shares typically don't come with voting rights. They will carry a 5% annual dividend that rises to 9% after five years, according to a person familiar with the matter. By investing in several big firms at once, the government hopes to avoid placing a stigma on any one firm for getting government help.
The plan will be structured to encourage firms to bring in private capital. For instance, firms returning capital to the government by 2009 may get better terms for the government's stake, a person familiar with the discussions said. |
Update at 8:08 a.m. ET: Bush says Treasury Secretary Henry Paulson and other members of his economic team will provide additional details about the government's implementation of the bailout plan.
Update at 8:06 a.m. ET: As of this morning, Bush says the FDIC will "temporarily guarantee most new debt issued by insured banks" and "expand government insurance to cover all non-interest-bearing transaction accounts" that small businesses use to cover day-to-day operations.
Bush, speaking after a meeting with his economic team, says the Federal Reserve will also become "a buyer of last resort for commercial paper."
"By unfreezing the market for commercial paper, the Federal Reserve will help American businesses meet payroll and purchase inventory and invest to create jobs," he says.
Update at 8:02 a.m. ET: President Bush says the government will use a portion of the $700 billion bailout package to purchase equity shares in banks to ensure liquidity.
He describes this as an "essential short-term measure to ensure the viability of America's banking system."
Original posting at 7:31 a.m. ET: President Bush is scheduled to make a statement on the economic crisis at 8:05 a.m. ET. Click here to watch a live feed from the White House.
(Photo by Susan Walsh, AP; Text cloud based on Wordle.)