WASHINGTON — In an effort to increase liquidity, and an action that the United States may emulate later this week, the British government today bought $63 billion worth of shares in the country's largest banks.
The move gives the government a majority stake in the Royal Bank of Scotland and the new bank that will be formed as a result of the impending merger between Lloyds and HBOS.
In return for the cash infusion, the banks will be required to lend more money to businesses and individuals.
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The German government announced a plan to provide loan guarantees of up to $500 billion to stimulate bank-to-bank lending and $108 billion to pump up the banking system.
Last week, the Bush administration announced that it would undertake a program similar to Britain's in this country. It has not announced the details but officials of the Treasury Department and Federal Reserve met yesterday to discuss the specifics, according to published reports.
In a related move, the Fed on Sunday announced its approval of the merger between Wells Fargo and Wachovia. The merger was sought by Wachovia because the Charlotte, NC-based banking giant has been hurt badly by the housing and credit crisis.
The FDIC had sought a merger partner for Wachovia and there had been a tentative agreement with Citigroup but Wachovia changed its mind and accepted the Wells Fargo offer. Citigroup went to court to object to the merger and won a temporary delay but then walked away but has said it plans to sue Wachovia for breach of contract.
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