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Govt. May Take Ownership Stakes in Banks

October 8, 2008 - by Donny Shaw

The latest on how the Treasury may implement the new powers Congress granted them with the Emergency Economic Stabilization Act, via the New York Times:

>Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.
>
>Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. Such a move would quickly strengthen banks’ balance sheets and, officials hope, persuade them to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones.

This is very similar to the bailout plan announced in Britain yesterday and much closer to what many economists want done about the financial crisis.

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