After weeks of deliberation as to the most prudent course of action regarding how to spend the $700 billion allocated for financial rescue, it seems that the Treasury now has a new lease on the situation. Instead of the government over-paying banks to purchase their “trash assets”, the idea will be to inject capital into the banks. Taking an equity stake, as opposed to simply buying toxic assets, will create a greater opportunity for an eventual taxpayer-upside, as well as strengthen balance sheets; a crucial feat that will be required in order for banks to afford to begin lending again.
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