WASHINGTON — Treasury Secretary Henry Paulson said Friday that the Bush administration will move ahead with a plan to buy stock in financial institutions. Paulson said the program to purchase the stock will be open to a broad array of institutions.
The administration received the authority to make direct purchases of stock in banks in the $700 billion measure Congress passed to rescue the nation’s financial system.
It would mark the first time the government has taken equity ownership in banks in this manner since a similar program during the Great Depression.
Background to plan
Paulson announced the administration was moving forward with the program during a news conference at the conclusion of discussions among finance officials of the Group of Seven major industrialized countries. That group endorsed the outlines of a sweeping program to combat the worst global credit crisis in decades. "As we develop plans to purchase equity … we are working to develop a standardized program that is open to a broad array of financial institutions,” Paulson said.
Paulson said the government’s program would be designed to complement the efforts of banks to raise fresh capital from private sources.
He said that the government’s stock purchases would be of nonvoting shares so that the government will not have power to run the companies.
What comes next?
Paulson told reporters the administration was moving "swiftly and thoughtfully” to implement the new package.
The administration is expected to announce next week private sector asset management firms that will be selected to help run the program.