This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.

You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/7668704.stm

The article has changed 18 times. There is an RSS feed of changes available.

Version 3 Version 4
US set to outline banking rescue US set to outline banking rescue
(about 1 hour later)
The US government is expected to announce a $250bn (£143bn) bank rescue plan later, echoing steps taken by the UK and other European countries. The US government is due to unveil a $250bn (£143bn) bank rescue plan later, as world shares rise in anticipation.
In return for injecting cash, the US will hold stakes in banks including Goldman Sachs and Morgan Stanley. Echoing steps taken by the UK and other European countries, the US will buy stakes in its largest banks including Goldman Sachs and Morgan Stanley.
President George W. Bush and Treasury Secretary Henry Paulson are due to make statements before US markets open. President George W Bush and Treasury Secretary Henry Paulson are due to make statements before US markets open.
The money will come from the $700bn bail-out package approved by US lawmakers earlier this month.The money will come from the $700bn bail-out package approved by US lawmakers earlier this month.
'Universal plan' Special meeting
Unlike the UK plan, all US banks will be expected to take part in the scheme, Ralph Silva, a banking analyst at Tower Group, told BBC News. The US plan - effectively part-nationalisation - comes after the bosses of the country's largest banks were summoned to a special meeting at the US Treasury on Monday.
Reports say the plan may also include increasing deposit insurance for certain bank accounts and guaranteeing certain types of bank lending. These steps will allow us to restore more normal market functioning and encourage private capital to further support the reinvigoration of financial markets Federal Reserve chairman Ben Bernanke
On Monday, the UK said it would inject up to £37bn of taxpayers cash into Royal Bank of Scotland, Lloyds TSB and HBOS. Although exact details have yet to be released, reports say the first purchases will be in the nine largest US banks, which also include Citigroup, Wells Fargo and Bank of America.
Governments in the eurozone have said they are putting aside more than 1 trillion euros to protect banks through guarantees and other emergency measures. The aim - as is the case with similar moves in the UK - is to increase the banks' depleted capital reserves.
The bulk of the money will be used to guarantee lending between banks - part of a plan agreed at the weekend by the 15 nations that use the euro. The US Treasury hope that this in turn will allow the banks to resume more normal lending patterns and help alleviate the continuing credit crunch.
In addition to the stock purchases, the US Treasury is also expected to announce that the state will temporarily provide insurance for loans between banks.
Wells Fargo is one of the banks expected to be involved
This is a further move aimed at increasing inter-bank lending, which keeps the banking system working, enabling banks to lend to other businesses and private individuals.
Speaking overnight, US Federal Reserve chairman Ben Bernanke said he was confident the moves would be successful.
"These steps will allow us to restore more normal market functioning and encourage private capital to further support the reinvigoration of financial markets," he said.
Share surges
Anticipation of the US announcement has had a major impact on global shares:
  • Japan's main Nikkei index closes Tuesday up 1,171 points or 14% at 9,448, the biggest one-day rise in its history
  • The UK's FTSE 100 was up 158 points or 3.7% at 4,415 in morning trading
  • Germany's Dax had advanced 173 points or 3.4% at 5,236, while France's Cac had added 152 points or 4.3% at 3,683
  • Wall Street's Dow Jones ended Monday up 936 points or 11% at 9,388
  • Australian shares advance 431 points or 4%
'Too small'
The US government is expected to buy preference shares in the banks.
Preference shares pay a fixed rate of interest instead of a dividend, which has to be paid before other shareholders receive anything, but they do not carry voting rights.
US taxpayers may even end up making a profit from the shares if the rescue packages work and the banks recover, but that is not guaranteed.
Despite the big rises in global shares, some analysts have questioned whether the anticipated US move is bold enough.
"The actual amount [of the plan] is still a little small," said Nagayuki Yamagishi, a strategist at Mitsubishi UFL Securities.
European lead
America's move, due to be announced around 1330 BST, comes a day after the UK said it would inject up to £37bn of taxpayers cash into British banks Royal Bank of Scotland, Lloyds TSB and HBOS.
And European governments that share the euro are putting aside more than 1 trillion euros to protect banks through guarantees and other emergency measures.
The bulk of the money will be used to guarantee lending between banks.
The cash will also be used to take stakes in ailing banks.The cash will also be used to take stakes in ailing banks.