Treasury considers bank purchasing plan

WASHINGTON, Oct. 9 (UPI) -- The U.S. Treasury Department said it is considering a plan of buying bank shares to restore confidence in lending.

Treasury officials said the radical shift in strategy was permissible under the $700 billion financial bailout bill, The New York Times reported Thursday. The original focus for the Treasury was purchasing frozen, hard-to-value security assets, not directly purchasing bank shares.

The plan emerged as stock indexes around the globe plummeted in recent days in spite of the bailout bill and a coordinated rate cut announced by several central banks Wednesday.

At a news conference Wednesday, Treasury Secretary Henry Paulson Jr. said the government "will use all the tools we've been given … including strengthening the capitalization of financial institution of every size."

One potential snag, the Times reported: The plan would be voluntary for banks but those that participate would be subject to Treasury standards on executive compensation.

In a broader sense, the strategy would take time to work. "Everyone is conditioned to getting instant relief from the medicine, and that is unrealistic," Allen Sinai, president of Decision Economics, told the Times.