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Paulson to Banks: Do It for Your Country

$250B bailout needed to restore faith, keep capital at home

By Clay Dillow, Newser Staff

Posted Oct 14, 2008 1:00 AM CDT

(Newser) – The $250 billion plan to guarantee new bank debt and unlimited bank deposits in certain accounts isn’t just an option, Treasury Secretary Paulson told the chiefs of nine banks yesterday; it’s for the good of the country. The plan, the country’s response to similar European banking actions, is engineered to quash feats that US banks will default and keep capital from flowing overseas to safer banks, the New York Times reports.

“The Europeans not only provided a blueprint, but forced our hand,” Kenneth Rogoff, a Harvard economist and McCain adviser, said. “We’re trying to prevent wholesale carnage in the financial system.”

[Images (2)]

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Keeping up with the Joneses; Secretary Paulson told big banks that a move similar to Europe's is needed to keep investment from flowing overseas. (AP Photo/Charles Dharapak)

U.S. Treasury Secretary Henry Paulson shake hands with British Chancellor of the Exchequer Alistair Darling during a bilateral meeting at International Monetary Fund headquarters Saturday. (AP Photo/Jose Luis Magana)

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I don’t think making this as easy as possible for the financial institutions is the way to go. You need some carrots but you also need some sticks.
- Senator Chuck Shumer, on executive pay and dividend restrictions for banks accepting bailout cash

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Paulson to Banks: Do It for Your Country