Vast Bailout by U.S. Proposed in Bid to Stem Financial Crisis
By EDMUND L. ANDREWS
Published: September 18, 2008
reposted from the NYTIMES.com
WASHINGTON — The head of the Treasury and the Federal Reserve began discussions on Thursday with Congressional leaders on what could become the biggest bailout in United States history.
While details remain to be worked out, the plan is likely to authorize the government to buy distressed mortgages at deep discounts from banks and other institutions. The proposal could result in the most direct commitment of taxpayer funds so far in the financial crisis that Fed and Treasury officials say is the worst they have ever seen...
...Hoping to shore up confidence with a show of financial shock and awe, the Federal Reserve stunned investors before dawn on Thursday by announcing a plan to provide $180 billion to financial markets through lending programs operated by the European Central Bank and the central banks of Canada, Japan, Britain and Switzerland.
But after an initial sense of relief swept markets in Asia and Europe, the fear quickly returned. Tensions remained so high that the Federal Reserve had to inject an extra $100 billion, in two waves of $50 billion each, just to keep the benchmark federal funds rate at the Fed’s target of 2 percent.
None of those actions, however, brought much catharsis or relief, with banks around the world remaining too frightened to lend to each other, much less to their customers.