Paulson Signals U.S. May Invest in Banks to Shore Up Confidence

by Dave Keating | October 9, 2008 at 01:18 am

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Following yesterday's announcement that the UK will start investing in banks to shore up consumer and bank confidence, the US appears to be set to do the same thing. Part of the motivation behind this is, rather than letting banks fail and using the FDIC to secure consumers' savings, the government would invest in the banks to keep them afloat.

Treasury Secretary Henry Paulson signaled the government may invest in banks as the next step in trying to resolve the deepening credit crisis.

Paulson told reporters in Washington yesterday that legislation Congress passed last week to rescue financial institutions gave him broad authority that he intends to use, beyond just buying mortgage-related assets on banks' balance sheets. He indicated that an option available may be boosting companies' capital with cash infusions.