White House considers ownership stakes in banks

"The Bush administration is considering taking ownership stakes in a number of U.S. banks as one option it might use to deal with a serious credit crisis, an administration official said Wednesday.

This official, who spoke late Wednesday 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.

This official said that all the new powers granted in the legislation were being considered as the administration seeks to deal with a serious credit crisis that has already caused the biggest upheavals on Wall Street in seven decades.

A decision to inject capital directly into financial institutions in return for ownership stakes would be similar to a plan announced earlier Wednesday by Britain.

Asked about the British approach, Treasury Secretary Henry Paulson did not reject the idea but said he did not want to speculate on which of the new powers would be employed."

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So now the government is going to buy the banks that they just lent all that money to?