Clear Debt Now

Written by admin on October 21st, 2008

Support Of Bank Debt Considered By US Government

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According to recent reports, the US government is seriously considering a proposal to guarantee billions of dollars in bank debt and providing temporary insurance measures for all US bank deposits. This another part the plan to get bank lending markets moving again while also balancing out the heavy losses experienced by national equity markets.

Other reports show that US and British financial officials are working on similar plans for alleviate the financial crisis by the injection of government money into banking institutions. This would of course be leveraged with repayment plans on different loans as well as ownership stakes in the ailing banks.

Specifically, British officials have stated that they will offer banks 50 billion pounds of emergency capital and 250 billion pounds in guarantees to assist with certain debt loads. The British proposal is garnering support from Wall Street and is being examined at length by US officials.

White House spokesman Tony Fratto was quoted by the Wall Street Journal as saying that the government “is reviewing the idea and discussing it with our British counterparts.” Furthermore, Undersecretary of the Treasury for International Affairs, David H McCormick stated in the New York Times that: “As this thing has spread, the opportunities for co-operation have risen. We need to promote and highlight these common areas.”

This turn of events marks a radical shift in position for Treasury Secretary Hank Paulson who had been adamantly against plans to take direct actions to support the nations’ banks with direct stakes’ proposals. The change was facilitated by the spirally stock markets. As of Thursday, October 9th, the S&P 500 dropped 7.6% while the Japanese Nikkei dropped 11% the following day due to tanking Asian markets.

Other markets around the globe have suffered similar fluctuations. In Germany, proposals like those going forward in Britain have been put under consideration as well. The purpose is to shore up German banks with billions in Euros by following the lead of Britain and the US.