A Forex View From Afar

Government Banking

The U.S. Treasury is analyzing an initiative to inject money in the financial system by buying ownership stakes in banks. This comes after more analysts and politicians said this would be a possible solution in which taxpayers’ money would not be put at risk. Treasury sources have said the plan, in its current form, would allow authorities to make such a move.

The U.K. Government approached the same solution this week, injecting as much as $87 billion in the financial system. Some have said that the Government’s participation in banks’ equity shares could rise to as much as 30% of the four biggest banks in the U.K. In the 90’s, a similar solution was implemented by the Nordic countries; however, the financial system still needed a long time to recover. At the end of the financial crisis, the Nordic Governments were even able to make money by selling the banks’ shares.

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