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U.S. stocks surge

Dow gains more than 900 points

October 13, 2008

WASHINGTON (AP) -- Stocks surged on Wall Street and around the world for the first time in days Monday as the U.S. said it plans to swiftly implement a broad financial rescue package and Europe put almost $2 trillion on the line to break the lending logjam threatening the world's economy.

The Bush administration summoned executives from leading banks to a meeting in Washington Monday afternoon to work out details of the $700 billion plan aimed at thawing the credit markets -- the economy's lifeblood.

The Dow Jones industrials gained more than 900 points in a stunning rebound from days of big losses. European markets rallied following Asia's lead in response to the widespread government initiatives.

"These are tough times for our economies yet we can be confident that we can work our way through these challenges and America will continue to work closely with the other nations to coordinate our response to this global financial crisis," President Bush said following a meeting with Italian Premier Silvio Berlusconi.

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Treasury Department spokeswoman Brookly McLaughlin said officials from the Treasury Department and the Federal Reserve would participate in the meeting at the Treasury Department. The discussions are aimed at finalizing details on the rescue package Congress passed on Oct. 3.

The package has quickly expanded from purchasing financial firms' bad debt to include the government taking partial ownership in banks, among other possible steps.

Over the weekend, Paulson called the heads of the five biggest U.S. banks to come to Washington for face-to-face talks about the rescue plan, according to people briefed on the matter. They were not authorized to speak publicly because of the sensitivity of the negotiations.

Goldman Sachs CEO Lloyd Blankfein, Morgan Stanley CEO John Mack, Citigroup CEO Vikram Pandit, JPMorgan Chase & Co. CEO Jamie Dimon, and Bank of America Corp. CEO Kenneth Lewis were all asked to attend. There was some speculation that Paulson might have expanded the invitation to at least three other CEOs from various regional banks, the people said.

It was expected that whatever comes out of the meeting will be used to put the finishing touches on the plan, the people said.

The discussions take place against the backdrop of a presidential election, with about three weeks left before Americans go to the polls.

The administration's interim bailout package chief, Neel Kashkari, said early Monday the government is moving quickly to implement the rescue program, including consulting with private law firms on how to buy stakes in banks to boost their cash reserves.

He spoke as The Bank of England, the European Central Bank and the Swiss National Bank jointly announced they would work together to provide unlimited short-term funds to make money available to ease the credit freeze. The Bank of Japan said it was considering a similar move.

To assist the European banks, the Fed said it was taking actions to assure enough U.S. dollar funds were available to meet demand.

"The government cannot just leave people on their own to be buffeted about," said British Prime Minister Gordon Brown.

European governments said they are putting nearly $2 trillion on the line to protect the continent's banks through guarantees and other emergency measures. Pledges by Britain, Germany, France, Spain, Austria and Portugal in recent days have reached a total of $1.96 trillion. The sums are considered a maximum, and might not all be spent if the financial crisis eases.

The administration on Monday also announced the selection of a team of interim managers, picked an outside firm to help run the program and tapped Federal Reserve Chairman Ben Bernanke to head up the oversight board guarding against conflicts of interest.

Kashkari, the assistant Treasury secretary who is interim head of the program, said officials were developing the guidelines that will govern the purchase of bad assets and had consulted with six specialist law firms on how the government will take partial ownership of banks.

After those consultations, Kashkari said Treasury had chosen Simpson Thatcher & Bartlett LLP to move forward to help the government structure the stock purchase program.

"We are moving quickly -- but methodically -- and I am confident we are building the foundation for a strong, decisive and effective program," Kashkari said in a speech Monday to the Institute of International Bankers.

Kashkari, however, provided few details about how the program will actually buy bad assets and partial ownership in banks. He focused mainly on the nuts and bolts of getting the program running.

He said five veteran government officials had been chosen as interim heads of key components of the program including Tom Bloom, currently the chief financial officer at the Office of the Comptroller of the Currency, to serve as the chief financial officer for the rescue program.

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