Federal regulators pledged this morning to do all they can to shore up the struggling banking system and said they will launch a revamped program to inject fresh capital into financial institutions this week. The Treasury Department, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Office of Thrift Supervision and the Federal Reserve jointly issued the statement amid growing concern that some of the country’s biggest banks may need additional assistance to survive the fallout from the worst financial crisis since the 1930s. The statement did not name any specific banks or respond to reports that the government was considering increasing its ownership of Citigroup Inc.
The White House just last week downplayed persistent speculation that some banks could be effectively nationalized by the federal government. A revamped program, announced by Treasury Secretary Timothy Geithner earlier this month, to plow federal money into banks in return for giving the government ownership stakes will start Wednesday. Regulators provided some details on that program today.
“Any government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory,” the regulators said.