Genet Astatke-Faison

Treasury Secretary Henry Paulson announced details on the Monday.

Under the plan, which is part of the Emergency Economic Stabilization Act signed into law Oct. 3, the Treasury Department will buy $250 billion in preferred stock in the nation's financial institutions. The hope is that the capital injection will restore confidence in banks and encourage them to lend more freely.

The plan is separate from the $700 billion Troubled Asset Relief Program, whereby the Treasury Department will buy distressed loans and securities from banks.

Paulson announced Oct. 14 that nine of the nation's largest banks had agreed to accept $125 billion through the capital purchase program. Since then, the Treasury Department has gotten "indications of interest from a broad group of banks of all sizes" about the remaining $125 billion, Paulson said.

"Today, we are laying out a streamlined, systematic process for all banks wishing to access this program," he said.

To take part, banks should look for an application form on the Web site of their primary regulator. Terms will be the same for all institutions that apply before the Nov. 14 deadline, and regulators will use a standardized process to review all applications.

The regulator - either the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Federal Reserve, or the Office of Thrift Supervision - will then send the application along with a recommendation to the Office of Financial Stability at the Treasury Department. The Treasury will make the final decision on whether to make the capital purchase, giving "considerable weight" to the regulator's recommendation.

All transactions will be publicly announced within 48 hours of execution. Applications that are withdrawn or denied will not be announced.

"Sufficient capital has been allocated so that all qualifying banks can participate," Paulson said. "Let me be clear that this program is not being implemented on a first-come-first-served basis."

Paulson called the plan "an investment, not an expenditure" for the public. "There is no reason to expect this program will cost taxpayers anything. They will not only own shares that should be paid back with reasonable return, but also will receive warrants for common shares."

Participating banks will accept restrictions on executive compensation, including a ban on golden parachutes.

The nine institutions already signed on are Citigroup Inc., Goldman Sachs Group Inc, Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp., and Bank of New York Mellon Corp.

Reuters
Consumer mood hits 8-month high in September: survey
Friday September 12, 10:30 am ET
By Steven C. Johnson

NEW YORK (Reuters) - Consumer confidence soared unexpectedly to an eight-month high in September as lower fuel prices soothed inflation fears and made Americans more hopeful about the economy, a survey showed on Friday.

The Reuters/University of Michigan Surveys of Consumers said its preliminary index of confidence jumped to 73.1 in September, the highest since January, from 63.0 in August, for the biggest monthly jump since January 2004.

September's reading was well above economists' median expectation of 64.0, according to a Reuters poll.

The sunnier mood can be traced mostly to lower prices at the gas pump and consumers' one-year inflation expectations plunged to 3.6 percent, matching February's low, from 4.8 percent last month, according to the survey.

According to the survey, only two extraordinary events in the past quarter century have prompted such a steep one-month decline in inflation expectations: Hurricane Katrina in 2005 and the September 11, 2001 attacks on the United States.

"We were anticipating that lower energy prices would boost consumer sentiment but that the deteriorating job market would hold it down, but it appears that more consumers benefit from lower energy prices," said Gary Thayer, senior economist at Wachovia Securities in St. Louis.

On Wall Street, stocks were steady at lower levels as investors focused on the fate of investment bank Lehman Brothers (NYSE:LEH - News) as fears mount about its ability to survive.

U.S. government bonds pared gains after the stronger-than-expected sentiment reading while the dollar trimmed losses against the euro.

However, consumers still see inflation rising at a faster clip than they did a year ago, when the one-year inflation outlook stood at 3.1 percent.

The report's five-year inflation expectation fell more modestly to 2.9 percent, from 3.2 percent in August.

Also encouraging, the report's index of current conditions rose to 76.5, from 71.0 in August, while the index of consumer expectations jumped to 70.9 from 57.9 in August, the largest monthly jump in that reading since March 1991.

While expectations have brightened, U.S. households remain defensive when it comes to spending, and the report said nine in 10 consumers think the economy is in recession.

"Consumers still voiced cautious expectations for job and income growth, and indicated no change in their spending plans," survey director Richard Curtain said.

Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto, noted that "consumer sentiment tends to be quite volatile," adding that consumers will remain "value-driven in their spending activity."

The report did show, however, that for the first time in 20 months, more consumers expected the pace of economic growth to increase over the next year than to decrease.

"At best, the data represent the first tentative indication of a rebound in consumer spending in early 2009," Curtain said.

(Editing by Tom Hals)