Treasury Mulls US Bank Ownership: Reports

Treasury says the $700 billion bailout bill gives it the right to take ownership positions in banks, according to media reports.

Author:: TSC Staff
Publish date:: Oct 9, 2008 1:10 AM EDT

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) - Get Report

and

Barclays

(BCS) - Get Report

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,

reported.

This article was written by a staff member of TheStreet.com.