Bank regulators reviewing guidance plan

WASHINGTON, Nov. 11 (UPI) -- U.S. banking regulators are firming up a guidance plan that would dictate rules for banks participating in the federal financial bailout plan, sources said.

The Office of Thrift Supervision, the Federal Reserve, the U.S. Treasury Department and the Office of Comptroller of the Currency are struggling with the question of how to encourage banks to make more loans available without encouraging them to make bad investments, The Washington Post reported Tuesday.

"Any suggestion that the guidance will tell banks not to lend to creditworthy customers is not correct," Kevin Mukri, a spokesman for the Office of the Comptroller of the Currency told the Post.

Lawmakers are weighing in with a variety of concerns.

"These loans must not be used to acquire healthy banks, hoard in their coffers, or pay shareholder dividends," wrote Sens. Charles E. Schumer, D-N.Y. and Robert Menendez D-N.J. in a letter to Treasury Secretary Henry M. Paulson Jr.

White House officials have said paying dividends to shareholders is important for the economy, the Post said.

More than half the federal funds banks receive could be used to pay shareholders in the next three years – money that could have been used to create new loans, the Post said.