Paulson Signals US May Invest in Banks to Shore Up Confidence - Bloomberg

Oct. 9 (Bloomberg) -- Treasury Secretary Henry Paulson signaled the government may invest in banks as the next step intrying to resolve the deepening credit crisis.

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Paulson told reporters in Washington yesterday thatlegislation Congress passed last week to rescue financialinstitutions gave him broad authority that he intends to use,beyond just buying mortgage-related assets on banks' balancesheets. He indicated that an option available may be boostingcompanies' capital with cash infusions. ``It is the policy of the federal government to use allresources at its disposal to make our financial systemstronger,'' Paulson said. ``We will use all of the tools we'vebeen given to maximum effectiveness, including strengthening thecapitalization of financial institutions of every size.'' Banks worldwide aren't raising enough capital to offsetlosses: while posting $592 billion of writedowns and lossesduring the crisis, they have added just $442.5 billion of newcapital, according to data compiled by Bloomberg. TheInternational Monetary Fund anticipates losses will more thandouble to $1.4 trillion.

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