US moves to get rescue plan started
By Associated Press
WASHINGTON (AP) - The Bush administration said Monday it was studying ways to take partial ownership of some banks, while Europe took swift, unified action to thaw frozen lending and get the global economy moving again. Stock markets around the world rose.
The coordinated efforts by European and U.S. authorities to prop up the banking system brought a measure of relief to markets. The major U.S. stock indexes rose more than 4 percent, including the Dow Jones industrials, which at times gained more than 400 points. European markets rallied Monday following Asia's lead in response to the widespread government initiatives.
The administration's interim bailout package chief, Neel Kashkari, said the government is moving quickly to implement a $700 billion rescue program, including consulting with private law firms on how to buy stakes in banks to boost their cash reserves.
He spoke as The Bank of England, the European Central Bank and the Swiss National Bank jointly announced they would work together to provide unlimited short-term funds to make money available to ease the credit freeze. The Bank of Japan said it was considering a similar move.
"The government cannot just leave people on their own to be buffeted about," said British Prime Minister Gordon Brown.
The Bush administration welcomed the moves in Europe, saying what was needed now was a strong effort to demonstrate the resolve of governments to deal with the problems.
"We must all act decisively, individually and collectively, according to our needs, to secure stability and growth for the world economic and financial order," Treasury Secretary Henry Paulson said in statement. His prepared remarks to the closing session of the 185-nation International Monetary Fund and World Bank were read by Assistant Treasury Secretary Clay Lowery. Aides said Paulson was too busy working on the rescue program to attend the closing day of the three-day discussions.
The administration on Monday announced the selection of a team of interim managers, picked an outside firm to help run the program and tapped Federal Reserve Chairman Ben Bernanke to head up the oversight board guarding against conflicts of interest.
Kashkari, the assistant Treasury secretary who is interim head of the program, said officials were developing the guidelines that will govern the purchase of bad assets and had consulted with six specialist law firms on how the government will take partial ownership of banks.
After those consultations, Kashkari said Treasury had chosen Simpson Thatcher & Bartlett LLP to move forward to help the government structure the stock purchase program.
"We are moving quickly - but methodically - and I am confident we are building the foundation for a strong, decisive and effective program," Kashkari said in a speech Monday to the Institute of International Bankers.
Kashkari, however, provided few details about how the program will actually buy bad assets and ownership shares in banks. He focused mainly on the nuts and bolts of getting the program running.
He said five veteran government officials had been chosen as interim heads of key components of the program including Tom Bloom, currently the chief financial officer at the Office of the Comptroller of the Currency, to serve as the chief financial officer for the rescue program.
Kashkari said seven policy teams at Treasury had been created to focus on the different aspects of the program including buying bad assets such as mortgage-backed securities. Another team would work on buying residential mortgages, which he said were currently clogging the books of regional banks, and another would focus on the program to buy equity stakes in private banks as a way to boost their capital.
Kashkari announced that investment consultancy Ennis Knupp & Associates had been chosen as the private firm that will help Treasury review proposals from asset management companies. He said that 70 companies had made bids to become the master custodian firm and that a final selection of the winning firm would be announced by Tuesday.
He said more than 100 companies had submitted bids to become one of the five to 10 firms that will operate the program to buy and manage the bad assets from financial firms.
Kashkari's speech Monday marked his first public appearance since being selected a week ago to run the program.
To assist the European banks, the Fed said it was taking actions to assure enough U.S. dollar funds were available to meet demand.
The British central bank was making available $63 billion to the three largest British banks to bolster their balance sheets.
Meanwhile, French President Nicolas Sarkozy said his government will provide up to $491 billion to help banks stay afloat through the financial crisis. The German government assembled a rescue package worth as much as $671 billion.
"The hope is that today will mark a watershed, with vast measures of government reassurance finally rekindling some confidence in the shattered banking sector," said Keith Bowman, an analysts at Hargreaves Landsdown Stockbrokers in London.
Paulson said during weekend meetings with global financial powers that his department was working around the clock to carry out the plan. His comments were meant to convince investors that the world's largest economy is moving quickly to get lending restarted and avert what could be a deep and painful global recession.
Those dire concerns sent markets around the world reeling last week, giving the Dow Jones industrial average it worst week on record. Since peaking a year ago, the Dow is now down 40.3 percent. U.S. stocks have lost $8.4 trillion in value over the past year.
Throughout the weekend, the administration worked to restore confidence, using the annual meetings of the 185-nation International Monetary Fund and World Bank to send a message that global finance officials will do what it takes to resolve the crisis.
The Group of Seven major industrial countries issued a five-point action plan that pledged to do everything from preventing major banks from failing to unfreezing credit markets.
President Bush met with G-7 finance officials at the White House on Saturday morning and later traveled to the IMF to meet with the Group of 20, which includes rich countries as well as major developing nations such as China, Brazil, India and Mexico. He stressed the need for cooperation.
In Paris, the 15 nations in Europe's single-currency zone agreed Sunday to steps including temporarily guaranteeing bank refinancings.
The Bush administration over the past six weeks has taken over the nation's two biggest mortgage finance firms, Fannie Mae and Freddie Mac, rescued American International Group, the world's biggest insurance company, and won congressional approval of a $700 billion rescue package for the entire financial system.
As the bailout bill rushed through Congress, Paulson stressed that the major aim was to buy bad assets, primarily mortgage-backed securities, from financial institutions. The hope was that taking those bad loans off the books would encourage banks to return to more normal lending operations and unclog credit flows - the economy's lifeblood.
Paulson said Friday that the government also would use some of the money to buy stakes in banks. The goal is to give banks the resources to resume lending at more normal levels.
That about-face has left the administration trying to decide how much to devote to buying bad assets and how much to use for stock purchases.
Lawmakers who pushed to include the stock purchase program in the rescue bill over initial administration objections say the stock purchases can start much faster than the effort to buy bad assets and help restore market confidence sooner.
On Sunday, May 3 at 8 a.m. and 10 a.m, at St. Andrew’s Episcopal Church in Florence, Oregon, there will be a community prayer service for the victims of the earthquake that struck Nepal, India and China.
Wulfy Beach was created by Sponsors and Volunteers to improve the Community and provide a beautiful place for locals and tourists to enjoy Ten Mile Lakes. Due to the NEW beach, the Crawdad Festival is new and improved on Mothers Day Weekend.