WASHINGTON — The government prepared Monday to move the first batch of bailout money to banks as fretful world markets plunged again. Wall Street ended with a big drop at the closing bell, sending the Dow Jones industrials to their lowest close since the financial meltdown began.
The Treasury Department said it would start moving $125 billion to nine major banks this week by buying ownership stakes, the first big transfer since the $700 billion bailout package was passed early this month.
Assistant Treasury Secretary David Nason said the infusion would go to the largest banks in the nation, including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo.
A group of smaller but significant regional banks, including Capital One Financial and SunTrust Banks, began announcing their own preliminary deals with Treasury for another $125 billion. That money should be released as soon as paperwork is finished.
The Fed also began a major program to buy up the short-term debt known as commercial paper that businesses use to pay for everyday expenses and salaries. Lending, the lifeblood of the economy, froze up after the collapse of investment house Lehman Brothers in mid-September and has thawed agonizingly slowly since.
“All these efforts are doing some good, but the question is whether they will do enough,” said David Wyss, chief economist for Standard & Poor’s in New York. “The credit markets are still pretty locked up.”
Presidential press secretary Dana Perino told reporters Monday that the financing arms of the automakers might be eligible for federal help.
