Uncle Sam to get deeper in the banking business?
What's the next rabbit in Paulson's hat? Partial bank ownership...
"In another attempt to loosen credit markets and restore confidence in the financial system, the Treasury Department is considering a plan to take ownership stakes in many U.S. banks...
The Treasury plan, still preliminary, resembles one announced on Wednesday in the U.K. "
U.S. may take ownership stake in banks
According to the article, if the Fed takes ownership positions in banks, that this move would strengthen the balance sheets of the banks. However, they would have to do it in such a way as to not alarm bank shareholders, who might perceive the action as punitive and that the bank is failing.
If this will help restore confidence in the banking system and result in more lending, perhaps it would be a good idea. Even some Republican policy makers think so.
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