28 Oct 2008

Bail-out of US banks underway

10:24 am on 28 October 2008

The bank rescue programme in the United States is underway with nine banks to share $US125 billion in cash injections.

The Treasury move is designed to bolster their balance sheets so they will begin more normal lending.

They are: Citigroup, JP Morgan Chase, Bank of America, Goldman Sachs, Morgan Stanley, Wells Fargo, Bank of America Mellon, State Street and Merrill Lynch.

The funding is part of a $US700 billion federal fund. Smaller banks will also benefit.

As part of the bail-out, the Treasury is to buy stakes in banks in return for capital.

Banks have been struggling since the middle of 2007 with rising mortgage defaults and a credit crisis that has virtually frozen inter-bank lending and severely restricted lending to consumers.