(CNSNews.com) – President Bush on Wednesday defended the “extraordinary actions” his administration has taken to ease the nation’s frozen credit markets.
The U.S. government is injecting $125 billion into nine major banks, hoping they will use the money to rebuild their reserves and increase lending to consumers and businesses, the Associated Press reported. Another $125 billion will be made available this year to other banks if they need it.
In return, the government will get ownership stakes in the financial institutions. Banks, meanwhile, will have to accept limitations on executives' compensation.
After meeting with his Cabinet, the president said it’s “very important for the American people to know that the program is designed to preserve free enterprise, not replace free enterprise.”
He said it’s a “temporary” move. The bank shares purchased by the government eventually will be sold back.
Moreover, “the program is limited,” Bush said. The government will buy only a certain number of shares in individual banks. Those banks will be privately controlled, he said, adding that the government will sit by as a “passive investor.”
Bush said the plan is “well-thought-out” and “necessary.”
“The American people must understand that this carefully structured plan is aimed at helping you” (the American people), Bush said. If only Wall Street benefited, “we’d have had a different response,” he said.
Bush said acting quickly and decisively has prevented harm to “working people and small businesses,” who want access to bank loans.
The president is traveling to Grand Rapids, Michigan, on Wednesday for a luncheon with local business leaders. He said he wants to “share his thoughts” about why the government is taking a stake in private companies.
The first bank to take advantage of the government program was Bank of New York Mellon, which announced it would sell $3 billion in preferred shares to the Treasury. Other banks initially participating include Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase, Bank of America Corp., including the soon-to-acquired Merrill Lynch, Citigroup Inc., Wells Fargo & Co., and State Street Corp.
(This report includes material provided by the Associated Press.)