US announces another $800 bn bailout plan

US announces another $800 bn bailout plan

Washington: The US government’s commitments to contain the financial crisis now approach $7 trillion.

That figure includes funds to guarantee certain corporate assets and debts, although those funds may never actually be spent. Still, the overall figure reflects the huge liabilities the government is taking on to battle the meltdown.

Among the government efforts announced on Tuesday are plans to buy up to $600 billion in mortgage-related assets and up to $200 billion in loans for holders of securities backed by various types of consumer debt.

The new plans are the latest in a long list of government moves:

11 March: The Federal Reserve announces a rescue package to provide up to $200 billion in loans to banks and investment houses and let them put up risky mortgage-backed securities as collateral.

16 March: The Fed provides a $29 billion loan to JPMorgan Chase & Co. as part of its purchase of investment bank Bear Stearns.

July 30: President Bush signs a housing bill including $300 billion in new loan authority for the government to back cheaper mortgages for troubled homeowners.

7 September: The Treasury takes over mortgage giants Fannie Mae and Freddie Mac, putting them into a conservatorship and pledging up to $200 billion to back their assets.

16 September: The Fed injects $85 billion into the failing American International Group, one of the world’s largest insurance companies.

16 September:The Fed pumps $70 billion more into the nation’s financial system to help ease credit stresses.

19 September: The Treasury temporarily guarantees money market funds against losses up to $50 billion.

8 October: The Fed cuts its benchmark interest rate a half percentage point, to 1.5%. It follows a one-quarter point cut on 30 April and a three-quarter-point reduction on 18 March.

8 October: The Fed agrees to lend AIG $37.8 billion more, bringing total to about $123 billion.

14 October: The Treasury says it will use $250 billion of the $700 billion bailout to inject capital into the banks, with $125 billion provided to nine of the largest: Bank of America Corp., which received $15 billion; Bank of New York Mellon Corp., $3 billion; Citigroup Inc., $25 billion; Goldman Sachs Group Inc., $10 billion; JPMorgan Chase & Co., $25 billion; Merrill Lynch & Co. Inc., $10 billion; Morgan Stanley, $10 billion; State Street Corp., $2 billion; and Wells Fargo & Co., $25 billion. The $10 billion for Merrill has been deferred until its purchase by Bank of America closes.

29 October: The Fed cuts its benchmark interest rate to 1%, matching the low point reached in 2003. The rate hasn’t been lower since 1958.

10 November: The Treasury and Fed replace the two previous loans provided to AIG with a new $150 billion aid package that includes an infusion of $40 billion from the government’s bailout fund.

12 November: Paulson says the government will no longer buy distressed mortgage-related assets, formerly the centerpiece of the bailout, and instead will concentrate on injecting capital into banks.

17 November: Treasury says it has provided $33.6 billion in capital to another 21 banks, with the largest stake being $6.6 billion to Minneapolis, Minn.-based US Bancorp. So far, the government has invested $158.6 billion in 30 banks.

23 November: The Treasury says it will invest another $20 billion in Citigroup Inc., on top of $25 billion provided 14 October. The Treasury, Fed and FDIC also pledge to backstop large losses Citigroup might absorb on $306 billion in real estate-related assets.

Citigroup will assume the first $29 billion in losses, and after that the government will absorb 90% of losses and the company 10%. In return, the government will receive $7 billion in preferred shares and warrants for more than 250 million additional shares.

25 November: The Fed says it will purchase up to $600 billion more in mortgage-related assets and will lend up to $200 billion to the holders of securities backed by various types of consumer loans.

The Fed will buy up to $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. The central bank also will buy $500 billion in mortgage-backed securities, pools of mortgages that are bundled together and sold to investors.

The program on consumer debt will be supported by $20 billion of credit protection from the $700 billion bailout package enacted last month.