U.S. Treasury Said to Invest in Nine Major U.S. Banks
October 14th, 2008“My dear guests, I am Mr. Roarke, your host. Welcome to Fantasy Island.”
Via: Bloomberg:
The Bush administration will announce a plan to rescue frozen credit markets that includes spending about half of a total of $250 billion for preferred shares of nine major banks, people briefed on the matter said.
The companies are Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc., Morgan Stanley, State Street Corp., and Bank of New York Mellon Corp., the people said. One of the people also said Merrill Lynch & Co. will receive an investment.
The injections represent a new approach for Treasury Secretary Henry Paulson’s attempts to prevent a financial market meltdown from sending the U.S. economy into a prolonged recession. He’s following similar interventions by European leaders and using broad powers Congress gave him earlier this month to save the country’s banking system.
“They’ve decided they need to do something drastic and this is drastic,” said Gerard Cassidy, a bank analyst at RBC Capital Markets in Portland, Maine.
None of banks getting government money was given a choice about it, said one of the people familiar with the plans. All of the banks involved will have to submit to compensation restrictions, said the person.
The government will also guarantee the banks’ newly issued senior unsecured debt, making it easier for them to refinance their liabilities, the person said.
Allocating Money
The Treasury plans to spend $25 billion each for stakes in Citigroup and JPMorgan, people said. Another $25 billion will be divided between Bank of America and Merrill, which agreed last month to be acquired by Bank of America. Goldman and Morgan Stanley will each get $10 billion, while State Street and Bank of New York will get injections of about $3 billion each, people said.
Research Credit: Eileen
I like how Jeff Macke termed it:
“Being long a “systemically important bank” is akin to being one of Orwell’s “Animals who are more equal than others.” It’s like Daddy Warbucks whipping around the munitions players to cash in on World War I. I feel filthy, dirty and otherwise disgusted.”
http://www.minyanville.com/articles/GE-C-citigroup-gm-whr-nyt/index/a/19500
You know how They positioned themselves beforehand in these banks, which are like Tolkien’s “Nine for Mortal Men doomed to die”.