Treasury Mulls Backing Bank Debt

Treasury Secretary Henry Paulson is speeding up consideration of guaranteeing debt issued by banks after a similar move by European policy makers, according to a U.S. official briefed on the matter, Bloomberg reports.

The step is under active discussion as part of the effort to unblock credit markets, said the official, who spoke on condition of anonymity. Paulson already plans to buy stocks in financial companies and invest in distressed assets under the $700 billion rescue plan approved by Congress.

The Treasury chief may have to offer a backstop for U.S. banks' debt to keep a level playing field for American lenders in the wake of Sunday's decision by European leaders, according to Bloomberg. Policy makers are acting after the cost to protect corporate debt from default soared to record levels last week.

On Friday, Paulson said that the U.S. government is considering taking equity stakes in financial companies as part of its overall plan to stabilize the markets.

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