Administration ponders part ownership in banks
The aim of such a move would be to thaw the lending freeze that threatens to push the world's economy into recession. It comes after rampant fear about the global economy sent investors scurrying on Tuesday for safety in U.S. government securities despite an orchestrated round of rate cuts by the world's central banks.
Investors also were hoping that selling, which gave the Dow its sixth straight day of losses, was overdone. Wall Street began the day higher, but then slid after declines in some blue chip names like General Motors Corp. weighed on the markets.
In an effort to show that governments around the world were focusing intently on ways to resolve the crisis, the administration announced that President Bush would meet with finance officials from the Group of Seven major industrial countries at the White House on Saturday.
"The president will have the opportunity to hear directly from the finance ministers about how the financial crisis is affecting their respective economies and the steps they are taking to deal with these challenges both individually and collectively," presidential press secretary Dana Perino told reporters.
An administration official, who spoke late Tuesday on condition of anonymity because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return.
Treasury Secretary Henry Paulson told reporters that Treasury was moving quickly to implement the $700 billion rescue effort and he specifically mentioned reviewing ways to bolster the capital of banks.
"We will use all the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size," Paulson said at a Wednesday news conference.
His statements came on the heels of Britain's move to pour cash into troubled banks in exchange for stakes in them — a partial nationalization.
Asked whether he would try something like the British plan, Paulson said: "We have a broad range of authorities and tools. ... We've emphasized the purchase of liquid assets, but we have a broad range of authorities. And I'm confident we have the authorities we need to work with going forward."
The Federal Reserve on Wednesday cut its target for the benchmark rate on overnight loans between banks to 1.5 percent. The cut from 2 percent took the rate to its lowest level in more than four years.
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