BGS3 News – U.S. Treasury to Buy Shares of Leading U.S. Banks

BGS3 News Update:

Since the passing of H.R. 1424, (commonly referred to as the “bailout plan,”) there has been little up-to-date public news about what the U.S. Treasury Department has been doing with its newly-bestowed powers. While the American people have been assured several times that work is being done to fix our troubled economy, the details of this work have been completely under wraps.

But BGS3 can now report that on Tuesday, October 14, 2008, the Treasury Department revealed a plan to use $250 billion to purchase preferred shares of several leading U.S. banks.

Nine banks, defined by U.S. Treasury Secretary Henry Paulson as “healthy institutions,” have agreed to sell preferred shares to the government in order to help repair the economy. Included in these nine banks are Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp. and Morgan Stanley. The government has limited its spending to $25 billion of risk-weighted assets per institution. Banks applying for government purchases have been given a deadline of November 14. BGS3 regularly negotiates with several of these banks, and it is with the help of these banks that BGS3 has been able to prevent high numbers of foreclosures across the country.

Additionally, on October 27 the Federal Reserve will begin to purchase short-term debt in the form of commercial paper (commonly used by companies for paychecks and supplies).

Sec. Paulson explained that these changes are necessary for banks to begin lending to their customers as well as other banks.

President Bush addressed concern about the U.S. government both regulating and partially owning these financial institutions, stating, “The government’s role will be limited and temporary. These measures are not intended to take over the free market but to preserve it.”

The housing crisis has clearly been a big factor in how our economy has plummeted to its current condition. BGS3 has been fighting foreclosures actively through Program 3648, and BGS3 is achieving record-numbers of short sale closings every month. But unfortunately, foreclosure rates are also increasing. These major changes could possibly lead to more prevented foreclosures and loan modifications, but only time will tell. BGS3 will continue updating its readers on this situation and what it means in regards to the housing crisis.

SOURCE: Administration unveils revamped bank bailout


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