INSTANT VIEW: U.S. to plow cash into weakened banks

NEW YORK (Reuters) - The U.S. Treasury Department on Tuesday unveiled a plan to inject $250 billion into beleaguered U.S. banks to beat back a credit crisis that threatens to swamp the economy.

KEY POINTS: * U.S. Treasury says to buy up to $250 billion in senior preferred, nonvoting shares in financial institutions * Treasury says maximum purchase amount will be $25 billion per institution * Treasury sets deadline of Nov 14 for banks to participate in equity purchase program * Treasury says preferred shares to pay 5 percent a year for first 5 years, 9 percent after 5 years * Treasury says firms in program must adopt Treasury's standards executive pay, corporate governance * Treasury says for firms in program, compensation for top executives won't be tax deductible above $500,000

COMMENTS:

JIM AWAD, CHAIRMAN, W.P. STEWART & CO., NEW YORK:

"The bank plan is another step in the right direction. The markets have been looking for it and they're reacting positively to it. I expect it to add to the series of efforts that will add stability to the financial and credit markets, but it's important to not get overly euphoric, because we still have to enforce it. It's like, if someone has a heart attack, they can't go out jogging the next day. I would put the financial system on the rehabilitation stage.

"There's been damage done, we'll see that when companies give their third-quarter results and provide fourth-quarter outlooks. There may be some stability in the markets, but you don't want to get overly excited because there has already been damage and the rehabilitation will be slow."

GREGORY MILLER, CHIEF ECONOMIST, SUNTRUST BANKS, ATLANTA:

"This clearly adds an immense backstop against the prospect of the largest of the financials falling into capital inadequacy.

"We have a capital adequacy problem that we can't seem to solve no matter how much cash we dump on to it because mark to market keeps moving the target. That will likely happen as long as house prices are falling and there's no way of telling when that stops.

"It probably serves a useful purpose. The kindest of us would suggest that it's a necessary evil, and that probably ranged down to folks who absolutely can't stand the interference in the markets."

STEPHEN MALYON, SENIOR CURRENCY STRATEGIST, SCOTIA CAPITAL,

TORONTO:

"Most of the news was outlined in the morning press. I didn't really see anything in the joint statement from the Fed, Treasury and FDIC that introduced anything shocking given what we've already read in the papers this morning.

"Dollar/yen is moving a little bit higher, but it's already positive on the session. I think partly this reflects pressure on the carry trade. Basically the world's lowest yielding currencies are underperforming."

KEVIN LOGAN, SENIOR U.S. ECONOMIST, DRESDNER KLEINWORT, NEW

YORK:

"It is certainly going to have a positive affect on financial markets. One of the important things is guaranteeing bank debt. Everyone is focusing on the capital infusion, which is helpful, but guaranteeing the bank debt will have an immediate impact -- banks have not been able to roll over their debt recently and that compromises or interferes with their funding and makes them less secure overall and it is a downward spiral. So by guaranteeing the debt they will now be able to roll over debt and that will keep them funded. So that immediately alleviates a lot of the problems."

MARKET REACTION: STOCKS: U.S. equity index futures hit session highs BONDS: Treasury debt prices add to losses DOLLAR: U.S. dollar extends gains against yen RATE FUTURES: Fed fund futures steady, suggesting a nearly 100 percent chance the Fed will cut rates by 25 basis points in October.