Paulson Says Bank Mergers May Be `Best' for Economy (Update1)
By Rebecca Christie
Oct. 21 (Bloomberg) -- Treasury Secretary Henry Paulson advocated mergers and acquisitions to strengthen the banking industry, while reiterating that the aim of a $250 billion bank recapitalization plan is to stimulate lending.
``There will be some situations where it's best for the economy and for the banking system for there to be a consolidation,'' Paulson told PBS television's Charlie Rose in an interview that will be broadcast tonight.
While the Treasury is ``not going to use this money to prop up failing banks,'' there will be ``some consolidation,'' the Treasury chief said. As an example, he cited Wells Fargo & Co.'s planned acquisition of Wachovia Corp. as a combination that's a ``very good thing for the system.''
The Treasury plans to purchase a $250 billion stake in financial companies to inject capital into a banking system struggling with the worst credit crisis in at least seven decades. The equity-purchase program is part of a $700 billion rescue package enacted this month that also includes government purchases of distressed mortgage-related loans.
Paulson urged banks to ``deploy'' the funds they receive, not ``hoard'' them.
In the interview, Paulson said the U.S. government has already taken ``bold steps that will make a difference in bringing confidence back, particularly to the banks.'' He tempered those comments by adding that ``clearly we're going to have a number of difficult months ahead of us in terms of the real economy.''
To contact the reporters on this story: Rebecca Christie in Washington at Rchristie4@bloomberg.net
Last Updated: October 21, 2008 16:19 EDT