On Tuesday Oct. 14, President Bush announced a bold plan for the Treasury to directly purchase up to $250 billion in equity shares from banks, and formally requested an additional $100 billion to help financial institutions under the $700 billion rescue plan signed into law just over a week ago.
The Treasury targeted nine banks for the first $250 billion, which included the country's four largest: Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo.
Also included in the plan are the two remaining independent investment banks, Goldman Sachs and Morgan Stanley. Merrill Lynch was also slated to receive some of the cash.
Bank stocks rallied on the news, and the Dow jumped more than 400 points before closing flat as investors considered the impact of the plan and digested the previous day's record climb.
The President also announced the government will insure all non-interest bearing bank accounts to ease worries about payroll and checking accounts that exceed the FDIC's insurance limits.
Credit markets in the United States, open after the Columbus Day holiday on Monday, responded positively to international and domestic efforts to boost bank confidence.
The London interbank overnight rate, or "Libor," which monitors the amount banks charge each other for loans, fell to 2.18% from 2.47% last Friday. Meanwhile the broader 3-month Libor rate fell to 4.64% from 4.75% on Monday, indicating that loans were becoming slightly cheaper.
U.S. Treasury bonds, usually used as a safe haven in times of economic strife, also fell in value.NEXT: Wed., Oct. 15 - Reality sets in