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, according to a report.

Author:: TSC Staff
Publish date:: Nov 4, 2008 1:04 AM EST

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) - Get Report

GE Capital unit and

CIT Group

(CIT) - Get Report

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) - Get Report

and

Bank of America

(BAC) - Get Report

. 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."