The Financial Crisis: Treasury Weighs Next Step to Stem Crisis
WASHINGTON -- The Treasury Department has begun canvassing financial executives to gauge their interest in participating in a program that would inject capital into banks, highlighting how quickly officials are shifting gears as the financial turmoil deepens.</br></br>Treasury is trying to determine how to structure capital infusions into healthy banks so that the institutions can begin lending again. One possible option is to take equity stakes, such as buying preferred stock, under terms that are favorable to the institution.</br></br>While details are still being discussed, the program would most likely be voluntary and aimed at encouraging healthy institutions to participate. Under one scenario, banks could come to Treasury and ask for an injection rather than having Treasury determine which banks would get an infusion. Treasury is also discussing a plan in which the government would inject capital into firms that raise a certain amount of money on their own from the private sector.</br></br>Any program would include incentives for firms to participate, such as the government paying favorable prices for any equity stake. The government would most likely be a passive investor.</br></br>Under the rescue legislation passed by Congress, institutions that participated would be subject to the executive-compensation restrictions in the law. Treasury thinks that wouldn't discourage participation.