U.S. set to buy stakes in financial institutions; Plan to ease crisis further ties banks to the government

Treasury's switch is raising questions about why such an approach wasn't adopted sooner. Mr. [Henry Paulson] had opposed the government's directly investing in banks because he worried about picking winners and losers. He was also concerned banks wouldn't participate because of t...

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Bibliographic Details
Published inWall Street journal. Europe
Main Author Deborah Solomon, Damian Paletta, Michael M. Phillips and Jon Hilsenrath
Format Newspaper Article
LanguageEnglish
Published Brussels Dow Jones & Company Inc 14.10.2008
EditionEurope
Subjects
Bailouts
Balance sheets
Banking industry
Central banks
Deposit insurance
Equity
Financial institutions
Investments
LIBOR
Loans
Political leadership
Recapitalization
Securities markets
Stock exchanges
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Summary:Treasury's switch is raising questions about why such an approach wasn't adopted sooner. Mr. [Henry Paulson] had opposed the government's directly investing in banks because he worried about picking winners and losers. He was also concerned banks wouldn't participate because of the perceived stigma and the potential for government interference, according to people familiar with the matter. "Investors need to be confident that the banks they're dealing with are unquestionably solvent, and it's in the interest of banks to assure investors that that's the case," Mr. [William Poole] said. "One way banks can provide that assurance is to raise additional capital, in some combination of private and government capital." He argues that the country may have turned a corner in dealing with the fear that has kept banks and investors from making even the most prudent loans. "I think we're through the worst on that," Mr. [Dean Baker] said. "Maybe I'll be proven wrong, but it really was at an extreme last week."
ISSN:0921-9986