Treasury Puts $250 Billion Into Banks, FDIC Widens Coverage
The Federal government has launched a multipronged move aimed at loosening credit markets. Under the plan, announced on Oct. 14, the Treasury Dept. will inject a total of $250 billion into banks in exchange for equity stakes. The Federal Deposit Insurance Corp. will temporarily insure non-interest-bearing transaction accounts, such as companies’ payroll accounts, with no ceiling. In addition, the Federal Reserve will develop a program to become, in President Bush’s words, “a buyer of last resort for commercial paper.”
Construction industry officials reacted with hope and skepticism. “I think this will help, but not immediately,” says Anirban Basu, Associated Builders and Contractors’ chief economist. Given the magnitude of banks’ liabilities, Basu believes “it will take some time and perhaps more money before the wheels of capitalism roll again.”