WASHINGTON (AFP) — The administration of President George W. Bush has put aside the idea of buying mortgage-related securities and now favors investing government money directly into US banks, The New York Times reported Sunday.
The newspaper said that in effect that plan means a partial nationalization of the banking industry.
The reported decision comes two weeks after the US Congress voted to allow the government to spend 700 billion dollars to buy distressed securities tied to mortgages.
Bush said Saturday that the world's richest economies were united on a "serious global response" to the financial meltdown.
"We will stand together in addressing this threat to our prosperity. We will do what it takes to resolve this crisis. And the world's economy will emerge stronger as a result," he said.
At a summit to be held in Paris Sunday, European nations will consider a proposal adopted in Britain under which the state guarantees inter-bank lending and buys stakes in banks.
Meanwhile, some US experts believe that the US Treasury Department's decision last month not to use taxpayers' money to save failed investment bank Lehman Brothers worsened the panic and contributed to it mushrooming into an international crisis, The Times said.
While the Treasury says it still plans to buy distressed assets, the scope of that plan is unclear, the report said.
Treasury officials said they hoped to make the first capital investments within the next two weeks, according to the paper.
One reason for Treasury Secretary Henry Paulson's rapid reconsideration was that global financial markets have been going downhill faster than anyone had seen before, The Times noted.
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