MELTDOWN FLASHBACK: Friday, Oct. 10, 2008

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Associated Press

Posted on October 9, 2009 at 3:20 PM

Treasury Secretary Henry Paulson confirms that the government will buy ownership stakes in banks for the first time since the Great Depression. His announcement, at a rare Friday night news conference, comes at the end of the Dow Jones industrial average's worst week.

Paulson says the government has the authority under the $700 billion rescue that Congress and President Bush approved last week. He says the action is in addition to the government buying the mortgage-backed securities of banks, which are dragging down financial institutions around the world.

The U.S. program will be designed to complement banks' own efforts to raise fresh capital from private sources. The government's stock purchases will be of nonvoting shares so it will not have power to run the companies.

Paulson's announcement comes at the conclusion of discussions among finance officials of the Group of Seven major industrialized countries. They endorsed the outlines of a sweeping program to combat the worst global credit crisis in decades.

In a statement at the end of that meeting, the G-7 officials vow to protect major banks and to prevent their failure. They also commit to working to get credit flowing more freely again, to support the efforts of banks to raise money from both public and private sources, to bolster deposit insurance and to revive the battered mortgage financing market. They did not provide specifics beyond that five-point framework.

Earlier, the Dow caps its worst week with a relatively modest loss of 128 points to close at 8,451. Over eight days, the Dow has lost just under 2,400 points, or 22.1 percent. It's the worst week on record by points and percentage. Since hitting its record high a year ago, the Dow has lost 5,713 points.

BROADER MARKETS: The Standard & Poor's 500 index falls 11 points, or 1.2 percent, to 899. It drops 18.2 percent for the week — its steepest decline since the week ending May 21, 1933. The Nasdaq composite index rises 4 points, or 0.27 percent, to 1,650. For the week, the Nasdaq loses 298, or 15.3 percent.

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