US to extend reach of $700 billion bail-out package
04 Nov 2008
The US treasury is weighing plans to extend the use of its $700 billion rescue fund beyond banks and insurance companies and buy stakes in other financial companies as well.
The package may now be extended to a broader range of companies, including bond insurers and specialty finance firms such as General Electric's GE Capital unit, CIT Group Inc and others, reports quoting sources familiar with the matter said.
Reports said the treasury may also scrap the auction process for purchasing assets and instead purchase some distressed assets directly.
The $700 billion rescue plan, known as the Troubled Asset Relief Programme (TARP), has earmarked about $250 billion to recapitalise the troubled banking sector.
''We are looking at many ideas for strengthening the financial system and for restoring lending,'' reports quoted a treasury official as saying.
Although both presidential candidates John McCain and Barack Obama have voted for the plan, the treasury's plans may be complicated by a new administration, which may have its own ideas about how best to use the remaining $450 billion, the report said.
It is, however, too early to say that the government's $700 billion financial rescue programme has succeed or gone off track. While the treasury has been criticised for shifting the focus of the plan from buying distressed assets to direct capital injection into financial institutions that may or may not need it, there are also no indications as yet that lending has increased.
Some of the aid takers are said to be using the capital for other purposes, such as acquisitions of other banks and the methods used in the rescue and the purpose behind it keeps changing every week.
