US injects $250b into key banks

The United States is following Europe’s lead as President George W. Bush yesterday announced a $250 billion plan by the US government to directly buy shares in the nation's leading banks, saying the drastic steps were "not intended to take over the free market but to preserve it".

Nine major banks will participate initially¹, including all the country's largest institutions, he announced, in a move that sent stocks soaring on Wall Street.

"These efforts are designed to directly benefit the American people by stabilizing² the financial system and helping³ the economy recover."

The Federal Reserve, meanwhile, announced that it would begin buying vast amounts of short-term debt on Oct 27 - its latest effort to break through a credit clog⁴.

"The government's role will be limited and temporary," Bush pledged. "These measures are not intended to take over the free market but to preserve it."

The administration plans to spend $250 billion this year on the stock purchases and the president was to certify⁵ that another $100 billion would be needed. That would leave $350 billion of the $700 billion program, presumably to be spent by the next president.

At an earlier briefing, Treasury⁶ officials said that the first purchases of stock from the nine major banks will begin within days and will total $125 billion.

Global stocks soared for a second day yesterday after Washington joined European plans to pump billions of dollars into banks in a concerted effort to turn back a worldwide financial crisis.

The Dow Jones industrial average rose about 120 points in early trading a day after its record 936-point jump.

On Monday, the Dow gained more than 11 percent, its biggest one-day rally since 1933.

European stocks rose sharply yesterday after they jumped more than 10 percent on Monday.

Japan's Nikkei stock index gained more than 14 percent yesterday, after markets were closed on Monday for a national holiday.

But Iceland's stock exchange plummeted⁸ more than 70 percent when it resumed trading after a 3-day break yesterday, though the index later recouped almost all those losses. Officials said the plunge⁹ was a statistical¹⁰ anomaly caused by the ongoing¹¹ suspension in trading of financial firms.
Questions:

1. By what huge percentage did Iceland’s stock exchange plummet⁷, only to recover later in the day?

2. How much is the US government planning to spend to buy shares in banks?

3. What has happened to global stocks for a second day after all the government announcements?

Answers:

1. 70%.

2. $250 Billion.

3. They soared.