America has followed Britain's lead and announced a massive bailout for leading US banks. Treasury secretary Henry Paulson has confirmed that the US government is to partially nationalise its leading banks through a £143 billion package.
The announcement comes just days after Gordon Brown confirmed a £37billion bail-out for some of the UK's most well-known banks, including Lloyds TSB
Following the Prime Minister's original announcement last week of the Treasury's £50billion plan, other European countries were quick to follow suit – Germany and France both confirmed similar plans to help liquidize their own financial markets. And in response to the more detailed plan yesterday, the FTSE recovered almost half of last week's losses marking its second-biggest percentage rise ever in one day.
US President George W Bush hopes that the scheme, which will see the US treasury buying minority shares in some of the country's biggest financial players, including Bank of America, Citigroup, JP Morgan Chase and Wells Fargo, will have a similar affect in America and on the Dow.
Although many of America's top banks were said to be 'unwilling' to take a bailout, concerned it would be seen as weakness, Paulson and President Bush made it clear that the move was necessary and only temporary.
In a TV address from the Whitehouse, the President told Americans that the measures were short-term and that the banks would then buy the shares back once the economy has recovered, saying, "These measures are not intended to take over the free market but to preserve it."
Those banks who do receive US Government cash will be under an obligation to curb executive pay – payouts for departing bosses, known as 'golden parachutes' and bonus schemes that encourage massive risk taking will be banned. The treasury will also scrap tax relief for banks on payouts of more than $500,000.
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