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What Exactly Is the US Doing to Save the Economy?


The U.S. government's initiative to rescue the struggling U.S. banking industry includes four steps to increase the flow of money through the financial system.

First, the federal government will offer to buy non-voting ownership stakes in banks, giving the institutions more money to lend to customers. The Treasury Department says nine large financial organizations have indicated an interest in the program.

Second, a government agency that insures bank deposits will temporarily guarantee some loans issued by banks - a step designed to make it easier for banks to lend money to each other.

The Federal Deposit Insurance Corporation, or FDIC, also will expand insurance to cover accounts that businesses use for daily transactions, such as paying employees.

In the fourth step, the Federal Reserve will begin a new program to help fund American corporations by buying so-called "commercial paper" from them. Commercial paper is a written promise by a company to repay a short term loan often used to finance day to day operations.

These initiatives are designed to be temporary, and come with conditions. For example, the Treasury Department says banks that receive money from the federal government will have to limit the amount of pay they give to executives.

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