Hank Paulson has figured out a way to remove the stigma of being the first U.S. bank to take government money, as the Treasury rolls out a plan to invest $125 billion from the bank bailout into nine of the largest banks in the country. The U.S. government will take preferred equity stakes in the biggest names in banking as it injects capital into Citigroup Inc., Goldman Sachs Group Inc., Wells Fargo & Co., J.P. Morgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp.
Continue reading below
The Treasury's decision, which echoes the European model of
intervention, is a marked contrast from the original plan of buying
up illiquid mortgage-related assets in order to aid banks. The new plan
also offers a three-year federal government guarantee for the bank's
newly issued senior unsecured debt to enable refinancing of the
institution's debt.
The Treasury plans to inject $25 billion each into Citigroup and
J.P. Morgan, with another $25 billion divided up between Bank of America
and Merrill, who have yet to complete their merger. Wells Fargo is to
get at least $20 billion, Goldman and Morgan Stanley will each get $10
billion, and State Street and Bank of New York will get about $3
billion each, Bloomberg reported. Paulson, the treasury secretary, is expected to detail the revised plan Tuesday morning at a
press conference, following a speech addressing the credit crisis by
President Bush at 8:05 a.m. Dealscape and TheDeal.com will have updates
and insights throughout the day.
- George White
See Bloomberg story
See Dealscape post on equity stakes See coverage on TheDeal.com
