The government is making $250 billion available to banks in an effort to help them recapitalize, in what could perhaps be the first steps toward an exchange traded fund (ETF) and market recovery.

The proposal follows similar plans announced in Europe on Monday, in which nearly every government is going to inject money into the banks in an effort to unfreeze the credit markets, reports Mark Landler for the New York Times.

In addition to the money injection, the United States will also guarantee new debt issued by banks for three years, a move designed to encourage banks to resume lending to one another and customers. The Federal Reserve will also start a program to become the buyer of last resort for commercial paper.

The moves are among the most sweeping ones since the Great Depression, if not ever, economists say. If it works, it could be studied by historians as a textbook case of the government’s role in the rescue of a failing economy, says Steve Lohr for the New York Times.

  • Financial Select Sector SPDR (XLF), down 42.2% year-to-date (black line)
  • Regional Bank HOLDRs (RKH), down 29.1% year-to-date (green line)

Financial Exchange Traded Funds (ETFs)

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.