Posted on 10/08/2008 8:29:31 PM PDT by NormsRevenge
WASHINGTON (Reuters) – The U.S. Treasury Department is considering taking ownership stakes in many U.S. banks in a bid to restore confidence in the badly shaken financial system, the New York Times said.
The moves would come after Treasury has had little success in unlocking frozen credit markets, The Times said on its website, quoting government officials.
Treasury officials told the newspaper the $700 billion bailout bill gives them the authority to inject cash into banks that request it, a move that would quickly strengthen banks' balance sheets and hopefully persuade them to resume lending.
In return, Treasury has the right to take ownership positions in the banks, including healthy ones.
The bank recapitalization plan, in its preliminary stages, has emerged as one of the preferred options being discussed in Washington and on Wall Street to address concerns banks have about lending to one another and to other customers, the paper said.
Treasury Secretary Henry Paulson spoke of the department's new authority to inject capital into banks as one of the powers in the new bailout law.
"We will use all the tools we've been given to maximum effectiveness," he told a media conference on Wednesday, "including strengthening the capitalization of financial institutions of every size."
(Excerpt) Read more at news.yahoo.com ...
I don’t think I like this idea.
But I’m not economist, so I don’t know. It just doesn’t sound right to me, the US Government owning banks? Even partially?
Can federal ownership of the 7-11s be far behind?
It’s about time!! To purchase toxic and illiquid assets at a fantasy price is just an insane idea. Whether you like it or not, to partially nationalize and recapitalize the major banks is the ONLY effective option on the table when the world banking system is basically collapsing.
I agree. What the financial system needs right now is more capital. This is probably one of the better ways to do it.
“I don’t think I like this idea. I’m not economist, so I don’t know. It just doesn’t sound right to me, the US Government owning banks? Even partially?”
It’s the most effective way to boost the banks. Since banks are leveraged, if you add $1 of capital, they can make $10 of new loans.
And some day when the economy is doing well again, the government can sell it’s stock at a large profit.
That makes sense, as the capital is more of a loan, and the stock a collateral...almost a free market principal...almost.
It’s called socialism.
I agree. What the financial system needs right now is more capital. This is probably one of the better ways to do it.Yep, we got piles of "capital" just laying around for buying up worthless garbage....It's our rainy day capital that we've been accumulating over the years just for such an occasion..
These final acts will cement George Bush as the first liberal President pretending to be a Republican in history.
Does anyone still think Bush WAS a conservative?
We need to spin-off the Blue States.
And yet doing nothing would be even worse.
What else can our government apply its touch of genius to?
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