Tuesday, October 14, 2008

Bank stocks surge on $250 billion investment plan;

Here we have administrations that want to privatise everything including prisons and roads now happy as can be that the bad old government buys equity in a number of large U.S. banks. Free enterprise is a fraud. What is important is capitalism and profit.
If governments are so inefficient and markets so efficient why is that the government--ie. you the taxpayer--have to rush in to save the financial system and why is it that the market is not working to solve the financial markets crisis. It is because conventional economics is a now bankrupt theology. We may get some change in theology as a result although even that is not at all certain, but the system is basically the same. The US will be in for increased pressure on budgets at every level of government except when it comes to bailing out the system or financing the military.


Banks surge on $250B investment plan
Shares of nine major banks that agreed to participate in plan soar at the start of the session.
By David Ellis, CNNMoney.com staff writer
Last Updated: October 14, 2008: 11:06 AM ET
NEW YORK (CNNMoney.com) -- Bank stocks surged following Tuesday's opening bell as top regulatory officials unveiled a sweeping plan to invest up to $250 billion in shares of ailing financial institutions.
Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and FDIC Chairman Sheila Bair announced details of the proposal Tuesday morning. The hope is that injecting $250 billion into the nation's financial system will get banks to lend to one another and ultimately thaw frozen credit markets.
The money will be doled out to banks of all stripes and sizes in exchange for preferred shares of the banks, i.e. stocks that pay special dividends.
Regulators said the plan will begin with nine large institutions who agreed to participate in the government program on Monday.
Included in that group were commercial banking giants Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500), each of which would get an investment worth $25 billion from the Treasury Department, according to two individuals familiar with the matter.
Shares of the four banks, except JPMorgan Chase, surged in morning trading on the news, building on Monday's massive market rally in which the Dow Jones industrial average gained 936 points, or 11.1%.
Also included in that group were Wall Street firms Goldman Sachs (GS, Fortune 500) and Morgan Stanley (MS, Fortune 500), both of which converted recently from stand-alone investment banks into bank holding companies as a result of the recent market turmoil.
Shares of the two firms extended their previous session gains on the news, gaining 9% and 21% respectively.
Brokerage giant Merrill Lynch (MER, Fortune 500), which agreed in mid-September to sell itself to Bank of America, would also receive capital, according to sources. The news sent it shares nearly 16% higher.
Rounding out the group were State Street (STT, Fortune 500) and Bank of New York Mellon (BK, Fortune 500), both of which primarily focus on processing bank transactions instead of consumer accounts. Shares of the two firms gained nearly 14% and 6% in late morning trading. Bank of New York Mellon said in a statement that it would receive $3 billion from the Treasury Department in exchange for preferred stock.
"It is time to get the markets working again for borrowers and investors," Robert Kelly, chairman and chief executive officer of The Bank of New York Mellon said in a statement.
The Treasury Department and Federal Reserve were not immediately available for comment about which firms were in fact on the list of nine that will receive investments.
The government's plan to inject capital, which would be drawn from the recently approved $700 billion government rescue package, were supplemented by other remedies, including the removal of insurance limits on some bank accounts and a pledge to guarantee new debt issued by banks.
First Published: October 14, 2008: 9:28 AM ET

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