WASHINGTON, October 14, 2008 (AFP) – The US government will spend up to 250 billion dollars to buy shares in struggling banks in the latest effort to stem a global financial crisis, Treasury Secretary Henry Paulson said Tuesday. “Yet the alternative of leaving businesses and consumers without access to financing is totally unacceptable. When financing isn’t available, consumers and businesses shrink their spending, which leads to businesses cutting jobs and even closing up shop.”
Nine large banks agreed to the government equity stakes in exchange for new capital, Paulson said.
The government also will temporarily guarantee unsecured debt and interbank lending and offer unlimited deposit insurance for many accounts as part of a global effort to stem a credit crunch.
The efforts are part of a 700-billion-dollar emergency rescue package approved last month by Congress in the face of a widening global crisis.
The moves come following a weekend pledge by the Group of Seven economic powers to use all available tools to keep financial markets functions and save key financial institutions.
“Today we are taking decisive actions to protect the US economy,” Paulson said.
“We regret having to take these actio