Paulson Props Up Banks

The bailout plan has reached its next step: Treasury Secretary Hank Paulson plans to use $250 billion of taxpayer funds to purchase stakes in thousands of financial firms to unfreeze the credit market and ease the financial crisis. With banks hoarding cash and sending money market rates soaring, the Treasury chief was forced to tack away from his first plan—buying distressed assets from banks—and buy up stakes in financial companies, as well as offer guarantees on new bank debts and purchase commercial paper. Bloomberg reports that the new program will begin with a $125 billion investment in Citigroup, Goldman Sachs, Wells Fargo, JPMorgan, Chase, Bank of America, Merrill Lynch, Morgan Stanley, State Street, and Bank of New York Mellon.