JPMorgan Chase ( JPM) Chairman and CEO Jamie Dimon hasn't ruled out using the U.S. Treasury Department's $25 billion capital injection in the banking titan on further acquisitions.

The federal government on Tuesday said it would pump $250 billion of badly needed equity into the troubled banking sector through the purchase of preferred equity stakes. The funds would be allocated as part of the $700 billion troubled asset relief program, or TARP, in a bid to improve investor confidence in the banking system by jump-starting the credit markets.

Already the nation's largest financial institutions including Bank of America ( BAC), Goldman Sachs ( GS), Morgan Stanley ( MS), Citigroup ( C) and Wells Fargo ( WFC), among others -- regardless of whether they need the capital -- have already agreed to participate in the voluntary program.

"The U.S. government is trying to do some very powerful things to fix the situation," Dimon said. "We really saw this as doing something which is good for the system. ... We did not think that JPMorgan should be selfish or parochial and try to stop what's good for the system because it might be mildly bad for us relative to some of our competitors."

Dimon's comments were made on a conference call to discuss JPMorgan Chase's third-quarter earnings, which came in better than expected, but still fell 84% from the year-ago quarter, as the economic environment deteriorated.

"We necessarily need to be prepared for a bad environment. We don't know what the environment is going to be," Dimon said. " Other than home lending, which we think is far worse than we would have expected, we're actually not that bad. ... but when you see this kind of unemployment, this kind of uncertainty, the reduced consumer spend, we are getting braced for increased loan loss reserves going forward."

The Treasury capital injection is via purchases of non-voting preferred equity "so we don't expect the government to get involved in our business, but it's clear that the government would like to use the capital to facilitate clients, to make loans and stuff like that. And we want to do that too," he said.

But when asked by an analyst later in the call whether the capital could be deployed to make new acquisitions, Dimon simply answered: "I would be willing to use it for anything that made sense for JPMorgan shareholders."

JPMorgan has come to regulators' aid twice this year, as it was one of the few banks that could absorb not one, but two massive, struggling financial institutions: Bear Stearns in May and Washington Mutual, last month.

At the end of the third quarter, JPMorgan Chase had Tier-1 capital ratio of 8.9%. The Federal Reserve considers banks with a Tier-1 ratio of 6% to be well capitalized.

On a positive note, Dimon said it was unlikely that JPMorgan would use the TARP to purchase bad assets from banks' balance sheets.

"I don't think it's highly relevant to us honestly," he said. "We're down to smaller numbers now, so the answer is probably not, but we'll see how the details come out and we'll figure it out then."

The capital injection could also grease the wheels for further acquisitions of mid-size regional banks, particularly as the housing and credit crisis extend both in longevity and beyond just subprime mortgages to include most forms of lending engaged by banks -- from credit card lending and prime mortgages to the beginnings of commercial lending troubles.

The one area where JPMorgan Chase lacks substantial presence at this point is in the southeastern U.S. In the past, speculation about a possible JPMorgan deal for SunTrust Banks ( STI) made the rounds, but no deal had been made.

In the Midwest, speculation has picked up that National City ( NCC) is looking for a buyer.

Acquisitions also may be on the mind of executives at Wells Fargo. The San Francisco-based bank, which also has been able to stay above water during the turbulent credit crisis, is set to receive another $25 billion in preferred equity through the Treasury's capital initiative. Wells Fargo, like JPMorgan Chase, has a strong tier-1 capital ratio of 8.58%.

"We believe the Treasury's plan is a positive step toward providing much needed capital for financial institutions that are in the best position to deploy it effectively to stimulate the U.S. economy and strengthen confidence in the U.S. banking system," CFO Howard Atkins said in prepared remarks on Wednesday to discuss third quarter results.

Wells also plans to still go through with a capital raising plan it announced in conjunction of its acquisition of Wachovia ( WB). Wells on Friday won a battle with Citigroup for the ownership of Wachovia.

Wells has been viewed as an opportunistic buyer, particularly during these turbulent times as other banks struggle to remain afloat from soured mortgages and leaking deposits. But for the most part, the bank remained on the sidelines until now.

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