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Government May Buy Bank Shares

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The Washington Post

The Tampa Tribune

Published: October 10, 2008

WASHINGTON - The Bush administration is hammering out final details of a plan that would allow the government to inject cash into banks in exchange for ownership stakes in an effort to shore up confidence in the faltering financial system, according to officials and sources who have been in contact with the Treasury Department.

Senior Treasury officials think they have the authority to take ownership stakes in banks under the $700 billion rescue package that was passed by Congress and signed into law last week, the sources said. But the administration has yet to work out several critical issues, such as how many banks should be included and when the plan should be put into effect.

Treasury is expected to announce the plan by the end of the month or even sooner, the sources said, speaking on condition of anonymity because their conversations with the agency were private. Congressional leaders could be briefed as early as today.

The proposal already is generating controversy on Capitol Hill and among private-sector firms concerned that a broad intervention of this kind would represent a vote of no-confidence in the entire banking industry, not just troubled institutions.
White House press secretary Dana Perino suggested Thursday that President Bush would support a government move to buy shares in troubled U.S. banks if Treasury Secretary Henry Paulson decides to do so.

"It was a part of the rescue package that the president supported, and it gives the Treasury secretary a range of possibilities, and investing in banks directly was one of those authorities," Perino said. "Secretary Paulson can use that authority as he sees fit."

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