U.S. Mulls Expanding Rescue to More Firms

The Treasury Department is considering using more of its $700 billion rescue fund to buy stakes in a broad range of financial companies, not just banks and insurers, the Wall Street Journal reports.

Bond insurers and specialty finance firms such as General Electric's(GE) GE Capital unit and CIT Group (CIT) would be the focus, the Journal reports, citing people familiar with the matter.

Treasury Secretary Henry Paulson in September unveiled a plan to buy up hard-to-sell assets of financial institutions such as mortgage-backed securities. But that proposal has yet to begin running, and the department may scrap part of that early plan -- purchasing assets through an auction process -- and instead purchase some of the distressed assets directly, the newspaper reports.

Of the original $700 billion, officials set aside $250 billion for equity investments. It has already invested $163 billion in a range of banks including Goldman Sachs (GS) and Bank of America(BAC). That number will likely expand at the expense of the asset-purchase plan, but by exactly how much is unknown, according to the Journal.

"We are looking at many ideas for strengthening the financial system and for restoring lending," said Jennifer Zuccarelli, a Treasury spokeswoman, the Journal reports. "We are weighing ideas and have made no decisions."

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