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One of the most anticipated set of details is the government's plan to inject capital and take stakes directly in commercial banks. According to press reports, the Treasury Tuesday will announce plans to invest roughly $250 billion in a wide cross-section of the country's 8,000-plus federally insured banks. The capitalization plan mirrors moves announced by European governments over the weekend. Expectations of the massive investment, coupled with similarly large moves made to add liquidity to commercial paper market and to interbank funding, helped spur the single biggest gain on Wall Street since 1939. Monday the Dow Jones industrial average gained 936 points, an 11.6% increase. Monday's rally followed last week's disastrous performance, the worst in the U.S. stock markets since 1933. The Federal Deposit Insurance Corp. is expected to add new senior preferred debt issued by banks and thrifts to its insurance for holdings in banks. The coverage would be in place for three years and would be in addition to covering all deposits in institutions insured by the FDIC. The debt coverage is meant to convince so far reluctant private investors to step up. The FDIC is also reportedly planning to temporarily lift the insurance limits for non-interest bearing bank deposit accounts. This would extend beyond the $250,000 limit per depositor that Congress permitted two weeks ago. Such a move would be a benefit to businesses and community banks. Some banking industry experts have complained that businesses with deposits exceeding insurance limits have been increasingly nervous about keeping accounts in small banks. Businesses fear they will lose money needed for payroll and operational expenses if their bank fails. Recent decisions by banking regulators to ensure that all depositors, whether uninsured or not, are covered when the country's largest banks fail have generated speculation the same treatment will not be extended to small bank depositors because their institutions on an individual basis do not pose a threat to financial system. The Wall Street Journal reported Monday evening that Treasury Secretary Henry Paulson was scheduled to meet with U.S. banking heads who were in Washington for meetings of the World Bank and the International Monetary Fund. Expected to attend were Ken Lewis, CEO of Bank of America, Jamie Dimon, CEO of J.P. Morgan Chase, Lloyd Blankfein, CEO of Goldman Sachs Group; John Mack, CEO of Morgan Stanley; Vikram Pandit, CEO of Citigroup; and Robert P. Kelly, CEO of Bank of New York Mellon. A Treasury spokeswoman said: "Treasury and the Fed are meeting today with leading financial market participants to finalize details on a financial market stabilization initiative." One person familiar with the matter said Paulson is expected to discuss details of his new plan to take equity stakes in financial firms, among other points intended to stabilize the financial markets sector. -Bill McConnell Bill McConnell is The Deal's Washington bureau chief. Categories Deal Video
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The Treasury Department is sharing details of its plan for infusing $700 billion in congressionally-appropriated money into the financial system with top officials from the nation's leading banks and Washington policymakers.
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