Treasury Mulls US Bank Ownership: Reports

The Treasury Department is considering taking ownership stakes in many U.S. banks to try to restore confidence in the financial system, according to published reports.

Treasury officials say the recently approved $700 billion bailout bill gives them the authority to inject cash directly into banks that request it. A move such as this would strengthen banks' balance sheets and hopefully persuade the banks to resume lending. In return, the law gives the Treasury the right to take ownership positions in banks, including healthy ones, the New York Times reports.

The Treasury plan was still preliminary and it was unclear how the process would work, but it appeared that it would be voluntary for banks, the Times reports.

The U.K. government announced a similar plan on Wednesday in which it would offer up to $87.5 billion to partly nationalize major banks such as Royal Bank of Scotland(RBS Quote - Cramer on RBS - Stock Picks) and Barclays(BCS Quote - Cramer on BCS - Stock Picks).

Sen. Charles Schumer, D-N.Y., who has been pushing the government to take equity stakes in U.S. banks, said the British decision would provide a good test case for the U.S., the Associated Press reports.

"This idea would, at a minimum, complement the administration's planned approach of buying up troubled assets and may prove to be the most promising tool of all in (Treasury) Secretary Paulson's kit," Schumer said in a statement, AP reported.