<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">
<HTML><HEAD>
<META http-equiv=Content-Type content="text/html; charset=iso-8859-1">
<META content="MSHTML 6.00.6000.16735" name=GENERATOR>
<STYLE></STYLE>
</HEAD>
<BODY bgColor=#ffffff>
<DIV><FONT size=2><STRONG><FONT size=5>Treasury To Invest In More
Banks<BR></FONT></STRONG>
<P><FONT size=-1>By Binyamin Appelbaum and David Cho<BR>Washington Post Staff
Writers<BR>Friday, October 24, 2008; D01<BR></FONT></P>
<P></P>
<P>The Treasury Department will announce as soon as today that a group of large
regional banks have agreed to accept investments from the government, industry
sources said. The new banks would join nine of the largest American banks,
including <A
href="http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=BAC&nav=el"
target="">Bank of America</A> and <A
href="http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=JPM&nav=el"
target="">J.P. Morgan Chase</A>, which were forced to accept $125 billion in
funding last week.</P>
<P>Separately, the Treasury's plan to buy mortgage-related assets from banks
appears to have stalled, industry sources said. Banks say that basic questions
about the plan remain unanswered. Applicants to serve as asset managers have
received little additional information from the Treasury in about a week, the
source said. It is not clear, for example, whether banks that manage assets can
also sell assets to the government.</P>
<P>The latest developments underscore the sea change in the Treasury's approach
to its $700 billion bailout of the financial industry. The asset-buying plan
pitched to Congress starting last month has been set aside in favor of an
initiative to invest at least $250 billion in banks, and possibly more, with
almost no restrictions on how the banks can use the money.</P>
<P>Treasury officials said yesterday that there would be no delay in the auction
process and declined to comment on plans to announce more bank investments.</P>
<P>The sources cautioned that the list of participants and the amounts of money
were not final as of last night. They spoke on condition of anonymity because
they were not authorized to speak for the participating institutions.</P>
<P>The announcement of new participants in the bank investment plan, including
Utah-based <A
href="http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=ZION&nav=el"
target="">Zions Bancorporation</A>, is intended to reassure the public,
politicians and investors that the Treasury is making progress, the sources
said. It is also meant to show that regional banks are now volunteering to
participate and to help jump-start the economy. Regional banks are major lenders
to mid-size companies.</P>
<P>But progress remains halting. The Treasury has yet to give federal money to
the first nine banks because of continued legal wrangling over the details of
the investment agreements. Assistant Treasury Secretary Neel Kashkari, the
official responsible for the program, said in testimony before Congress
yesterday that the next round of banks probably wouldn't get funding for "a few
weeks."</P>
<P>Banks that accept government investments must agree in return to issue the
government shares of preferred stock, which pay annual interest of 5 percent,
and warrants for shares of common stock, which allow the government to profit as
the company's share price rises. Banks also must accept limits on executive
compensation and cannot raise dividends without permission.</P>
<P>Officials have publicly urged companies to increase their lending, to help
revive the economy, but they privately concede that they cannot force banks to
lend. Indeed, officials argue that for some institutions, the best use of the
money may be plugging holes in the balance sheet or buying weaker banks.</P>
<P>The sources said that at least one bank that applied for funding was denied
by the government. As a result, banks that receive money are hoping investors
will view the federal funding as evidence of good health. At the same time,
investors may punish large regional banks that seem conspicuous by their absence
from the next round of federal investments.</P></FONT></DIV></BODY></HTML>