Bailout package could soon have strings
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It was less than two months ago that we all thought $700 billion was an amazing amount of money.
That it couldn’t possibly take that much to fix whatever was wrong with the financial system. Oh, for simpler times.
You throw in automakers, insurance companies, credit card firms like American Express and investment banks that are re-organizing to get a piece of the bailout pie, and the money disappears pretty quickly.
Marketplace’s Steve Henn reports on how the Treasury’s going to get more.
Remember when congress passed the bailout bill? The original plan was to use the entire $700 billion to buy up toxic assets from banks. But Bert Ely a banking industry consultant says that plan appears near death.
Bert Ely: It certainly hasn’t gotten off the ground at all.
Instead, industry after industry has lined up for help and the U.S. Treasury has found a lot of other uses for the money–like making
Chris Carey: direct capitol investments in banks, the Treasury would get preferred stock in return.
Chris Carey who tracks all this at bailoutsleuth.com says officials at Treasury set aside $250 billion to buy capital stakes in banking companies. Then–
Carey: Just yesterday another $40 billion for AIG the big insurance company that is in trouble.
Many members of Congress want Treasury to spend another $25 billion to help bailout the auto industry.
And they are not happy that some banks that have received Federal cash have not started lending again.
Ely: Many members of Congress have indicated a strong desire to have more strings attached to this money. And they want to see a linkage between capitol investment and lending.
Congress didn’t hand over the entire $700 billion all at once — just half.
Ely says that means President Bush and Treasury Secretary Paulson are going to have to go back to Congress and ask for the rest soon. When they do Ely expects congressional leaders to be ready for them with a list of demands.
In Washington, I’m Steve Henn for Marketplace.
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