Bush, Leaders Finalize Bank Ownership Plan

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WASHINGTON - In Washington, President Bush met with his top financial advisors to finalize the government's plan to take partial ownership in nine major banks.

Immediately after that meeting the President, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke took their solution to the American people.

Bush Charts a Bold Course

With fewer banks lending to each other, let alone to consumers and businesses the President today proposed bold new steps to safeguard America's strapped banking system.

Click the play button for more with CBN News Financial Editor Drew Parkhill.

The plan includes using $250 billion of the $700 billion rescue package to buy stocks in several large banks, making the U.S. government part owner.

"This new capital will help healthy banks continue making loans to businesses and consumers," Bush explained. "And this new capital will help struggling banks fill the hole created by losses during the financial crisis, so they can resume lending and help spur job creation and economic growth."

"This is an essential short-term measure to ensure the viability of America's banking system," he said.

It would also temporarily provide insurance on loans between banks, and put a cap on CEO compensation for participating firms.

It's modeled after on a European plan to protect banks with a $2-trillion investment, with a goal of providing immediate relief to the credit crisis.

"Right now a lot of small businesses and individuals, even some big businesses can't get any money, can't get the credit they need simply to keep operating. It is in short term, injecting additional money into the banking system will be helpful," former Secretary of Labor Robert Reich said.

World Markets Soar

So far, the news is helping to revive the markets.

Stocks in Asia have continued to soar. Japan's Nikkei jumped 14 percent - its biggest one-day gain in history. Markets in Europe were up again as well.

And here at home the Dow jumped more than 400 points. This comes one day after the Dow's best one-day performance since 1933, climbing a record 936 points by Monday's close.

"I think we're headed in the right direction," said one optimistic investor. "We all have to be hopeful."

After last week's 18 percent collapse in stocks - the worst weekly decline on record - more investors are growing hopeful that the surge may continue.

And the government plan may help to eventually shore up the economy.

Federal Reserve chairman Ben Bernanke wrote: "Our strategy will continue to evolve and be refined, and we will adapt to new developments and the inevitable setbacks. But we will not stand down until we have achieved our goals of repairing and reforming our financial system, and thereby restoring prosperity to our economy."

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CBN News
John Jessup

John Jessup

CBN News Washington Correspondent

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