President Bush today announced a $250 billion plan intended to stabilize the nation’s banking system.
Under the plan, the government will initially buy stocks in nine major U.S. banks. When financial markets stabilize and recover, the banks are expected to buy the stock back from the government.
The multifaceted plan represents the government’s most extensive attempt yet to unfreeze credit markets. The aim is to give banks the confidence to make loans to one another and their customers and help provide the economy the source of funds it needs to operate.
Bush called the plan an essential short-term measure that is not designed to take over the free market, but to preserve it.
Dr. Mark Dotzour, chief economist for the Real Estate Center at Texas A&M University, called the plan a first step in the right direction.
“While it’s a tragedy for free-market capitalism, the fact is it was necessary,” Dotzour said. “It appears the banking industry is going to become more like a regulated public utility.”
Source: Real Estate Center