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October 6, 2008

Treasury to Start Making Direct Investments in Banks?

It isn't much, but the most positive thing I've seen today is this paragraph hidden deep in a release from the President's Working Group on Financial Markets:

The new legislation also enables Treasury to directly strengthen the balance sheet of individual institutions. These authorities allow Treasury to act to remove some of the uncertainty regarding financial strength, and provide financial institutions with greater operating flexibility and enhance their ability to raise additional capital in the private marketplace.

I could be wrong, but I think this is the first time we have seen a statement that the Treasury may soon start making direct investments in individual banks. It has to happen, I think, and it's too bad it didn't happen sooner. Unfortunately, however, the Fed is giving indications that it won't do this proactively.

More here.

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