Bush Admin. announces partial nationalization of banking system

Ah, I love the smell of socialism in the morning, it smells like -- Europe. But is that necessarily a bad thing in order to save the banking system? From an L.A. Times story:

Bush administration officials today unveiled a dramatic partial nationalization of the U.S. financial system, a series of "unprecedented and aggressive steps" to pour at least $250 billion into the banking system and expand federal insurance protection in the largest government intervention since the 1930s...

The strategy closely resembles the path taken by Britain and the European Union, a route credited with reviving faltering stock markets there. The Dow Jones industrial average shot up more than 300 points shortly after it opened this morning, though the large gains later eased. Markets across Europe were soaring, as they did earlier in Asia.

Administration officials released the details of the massive government intervention, whose broad outlines began emerging Monday. They said the programs are intended to be temporary, lasting from one to five years with built-in expiration dates.

The centerpiece is a $250-billion infusion of cash into the banking system. Roughly half will go to nine large U.S. banks and financial institutions that agreed to participate after meetings with Paulson on Monday. Among them are Citigroup, Wells Fargo and Bank of America. The other half of the money will be made available to medium and smaller banks in the coming days.

In exchange for the cash, the federal government will get preferred, nonvoting shares in the banks, with a fixed dividend of 5% for five years, increasing to 9% after that. The goal is to provide money to banks at a fairly low cost for five years to get credit flowing though the financial system...

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