The Treasury Department is expected to announce that it will be pumping $250 billion into banks both large and small tomorrow… and the FDIC is expected to offer an unlimited guarantee on bank deposits in accounts that do not bear interest.
The NYT explains:
Treasury Secretary Henry M. Paulson Jr. outlined the plan on Monday to nine of the nation’s leading bankers at an afternoon meeting, officials said, in which he essentially told the participants that they would have to accept government investment for the good of the American financial system. This capital injection plan will use a huge chunk of the money authorized for Troubled Assets Relief Program.
Citigroup and JPMorgan Chase were told they would each get $25 billion; Bank of America and Wells Fargo, $20 billion each (plus an additional $5 billion for their recent acquisitions); Goldman Sachs and Morgan Stanley, $10 billion each, with Bank of New York Mellon and State Street each receiving $2 to 3 billion. Wells Fargo will get $5 billion for its acquisition of Wachovia, and Bank of America the same for amount for its purchase of Merrill Lynch.
The result of this “capital injection”? The US government will own preferred shares in all, yes all, of the major US banks, and will be paid dividends. The injection will not be voluntary, says the NYT.