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Why did the US authorities change their mind about the rescue plan?

It has been revealed over the last few days that the US authorities have changed the breakdown of their $700 million rescue package. They appear to have taken a page out of Gordon Brown's book and are now suggesting direct equity stakes in the various US banks in order to increase their financial strength.

So what about the toxic assets?

This change in strategy is set to cause major confusion in the US stock market where many analysts had already heralded the masterplan which would take toxic assets out of the marketplace and onto the government's balance sheet. Whilst these direct equity investment will assist the banks in the short term and possibly offer the taxpayer a less risky potential return, the question of what happens to these toxic assets still remains.

These are assets which have literally fallen to near zero and have decimated many balance sheets. The idea had been for authorities to take these assets onto the government's books, inject capital into the financial markets and create a situation which could see many of these toxic assets increase in value in due course. This would not only have reduced the number of house repossessions but it would also have given the US taxpayer a very good chance of making some very very good money.

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