The government’s move to buy preferred shares in banks is not a step toward nationalizing financial institutions, said President George Bush.
The program is designed to ensure government involvement in banks is limited in size, scope and duration, said Bush during a speech at the U.S. Chamber of Commerce.
The $700 billion rescue planned approved earlier in October is “not a government takeover. Its purpose is not to weaken the free market. It is to preserve the free market,” said Bush, addressing concerns that have been swirling ever since the government announced it plans to buy equity in banks and approved the bailout.
Bush said the government won’t exercise control over private firms. “Federal officers will not have a seat around your local banks boardroom table,” said the president.
According to Bush, every dollar used in the bailout will be subject to strong oversight. The rescue plan, he said will prevent executives from receiving a windfall and could ultimately cost the government “significantly” less than the initial investment.
Bush said many of the troubled assets the government buys will increase in value, enabling the government to eventually resell them at a higher price. What’s more Bush said the government will receive quarterly dividends from the banks it buys shares in. If the banks don’t buy back the shares in five years, that dividend would increase “substantially.”
Had the government not acted the “hole in the financial system would have grown larger,” said Bush, noting that families and companies would have had an even tougher time and the government would have had to respond later on with more drastic measures.
Bush said the plan is designed to make it easier for Americans to borrow money and to help banks get money flowing again to small and big businesses. “To help the American people is the goal of this plan,” said Bush.
While many had hoped the actions on the part of the government would have some immediate impact Bush warned that it will take some time.
“It took a while for the credit system to freeze up its going to take awhile for the credit system to thaw,” he said, noting the actions are big enough that it will work.
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