Washington was on Thursday under pressure to rush out a bank recapitalisation plan to reassure the markets after a dramatic late plunge in stock prices. US officials were hoping to have some time to finish the plan but analysts said they could be forced to act immediately. On Thursday, the White House confirmed reports that the Treasury is “actively considering” injecting public funds into banks in return for equity stakes. Ed Lazear, chairman of the White House Council of Economic Advisers, said: “There is still some variance on what we are considering but we do have the broad authority to do it…” A US recapitalisation programme would put capital not just into financial institutions that are on the brink of bankruptcy, but a much wider range of entities that have been weakened by the credit crisis. The plan under consideration is similar to the UK recapitalisation plan announced Wednesday. The government could take common shares but is more likely to take preferred stock which is paid before ordinary shares.  Among key differences, the US scheme would be voluntary, unlike the UK plan, which forces eight large banks to raise more capital, either from private investors or the government.

This entry was posted by Gwen Robinson on Friday, October 10th, 2008 at 5:41 and is filed under Capital markets. Edit this entry.