The U.S. government plans to invest about $250 billion in possibly thousands of banks as part of a far-reaching effort to shore up the U.S. financial sector, and an announcement of the plans could come as soon as Tuesday, sources have told CNBC.
The planned equity investments are part of a U.S. Treasury, Federal Reserve and Federal Deposit Insurance Corp. program. As part of the deal, the FDIC will insure all non-interest paying bank deposits and new preferred debt issued by banks.
Treasury Secretary Henry Paulson met with top Wall Street bankers on Monday to nail down the plan for the government to buy shares in financial firms to restore confidence in rattled markets.
The evolving plan marks a quick about-face for Washington policy-makers, who until recent days had been focusing on building an apparatus to soak up bad assets from banks.
Meanwhile, the Wall Street Journal, citing people familiar with the situation, reported late Monday that the federal government plans to buy preferred equity stakes in nine top banks as part of its effort to battle the financial crisis.
The newspaper did not report how much would be invested in each institution, but said the move is designed to destigmatize government investment.
The overall push by the feds could provide faster relief to a paralyzed banking system and would put the United States more in line with Europe, where governments on Monday pledged billions of dollars to recapitalize banks or guarantee lending.
