$125 Billion financial plan to purchase none banks
stocks was signed Sunday and will be deployed this week. The
deal is designed to help banks to start lending again.
Treasury Secretary Henry Paulson decided to use $250
billion of the $700 billion to make direct purchases of bank stock.
The first $125 billion will be deployed this week.
With $700 Billion plan which was passed on Oct.3,
government suggested to buy out bad assets from banks directly and
this plan is being currently worked out. It is expected that
government will use $100 billion to buy bad assets.
Treasury is also working with other banks to deploy
another $125 billion in stock purchase before the end of the
year.
With another bank announcement PNC Financial Services
Group is acquiring National City Corp for $7.7 billion in cash from
the government.
Treasury has agreed and encouraged stronger banks o
buy out weaker banks prompting critics to say that government should
not be choosing winners and loosers.
With the announcement of $125 billion stock purchase
plan credit market should ease this week. Important part is to
help banks with their balance sheets as banks need to start loaning
money to each other, thus opening up credit market.
On Wednesday, Fed is expected to cut the key federal
funds rate another half point, to 1 percent.
Housing market is slowly starting to come out of
bubble as new home sales rose to 2.7% or 464,000 homes sold.
Economists predicted drop in housing sales from August. The median
price of home has declined to $218,400 or 9.1%.
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