Paulson: U.S. will buy stock in banks
Secretary of the Treasury Henry M. Paulson Jr. (R) speaks with Chairman of the Federal Reserve Ben S. Bernake (L) at a meeting with members of the G7 at the Washington, D.C., October 10, 2008.
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Kai Ryssdal: It's rare indeed that a meeting of finance ministers from the Group of Seven countries gets as much attention as this one's getting. Any attention, really. But these are extraordinary financial times. Our Washington bureau chief John Dimsdale has more.
John Dimsdale: Following today's meeting, the seven finance ministers issued a general five-point plan to coordinate efforts to unfreeze credit markets. At a later press conference, Treasury Secretary Henry Paulson said the U.S. will go ahead with a plan to buy stock in banks. It would be the first time the U.S. government has taken an equity ownership in banks since the Great Depression. Taxpayers would be given preferred stock and banks would get an injection of capital that regulators hope will stimulate more lending. Paulson says many financial institutions would be eligible for the capital injection.
Tape of Henry Paulson: As we develop plans to purchase equity, as in the approach we are taking to broad mortgage asset purchases, we are working to develop a standardized program that is open to a broad array of financial institutions. Such a program would be designed to encourage the raising of new private equity capital to complement public capital.
Great Britain has already tried a government purchase of bank equity and that country's finance minister told the meeting today that it shows signs of working.
Also on the international agenda is a coordinated plan for more government spending, because beyond the bank crisis, Fred Bergsten at the Petersen Institute for International Economics says,the world is heading into a recession
Fred Bergsten: And it could be fairly deep. So we have to deal with the economic part of it as well and that means building on what the central banks already did with lower interest rates to try to stimulate demand.
Finance ministers themselves play down the prospects for a specific globally coordinated plan saying each country has its own problems and ways of responding. Still, the ministers meet again tomorrow, this time with President Bush at the White House
In Washington, I'm John Dimsdale for Marketplace.