US bail-out of banks is under way

The US government is providing liquidity to banks

The US bank rescue programme has got under way with nine firms to share $125bn (£80bn) in cash injections.

The Treasury move is designed to bolster the banks' balance sheets so they will begin more normal lending.

They are Citigroup, JP Morgan Chase, Bank of America, Goldman Sachs, Morgan Stanley, Wells Fargo, Bank of New York Mellon, State Street and Merrill Lynch.

Smaller banks will share another £125bn in the the cash-for-equity scheme, part of bigger $700bn government plan.

The funding comes from the US government bank rescue plan, approved by Congress after much wrangling and originally designed to provide liquidity by buying up toxic bank assets.

As part of the bail-out, the US Treasury aims to buy stakes in banks in return for capital.

One of the banks, State Street, said it had agreed to a scheme whereby the Treasury will invest £2bn in preferred shares and also be given warrants to obtain additional stock.

Banks have been struggling since the middle of 2007 with rising mortgage defaults and a credit crisis that has virtually frozen inter-bank lending and severely restricted lending to consumers.

On Friday PNC Financial Services Group used some of the $700bn government bail-out money to buy a rival, National City, for $5.6bn.

This will make PNC the US's fifth largest bank by deposits with the fourth most branches.