U.S. buys $125B in bank stocks

WASHINGTON -- The Treasury Department has made the first payments from the $700 billion bailout fund, a total of $125 billion in stock purchases from nine major financial institutions.

Treasury officials on Wednesday released a report on the payments, showing that the $125 billion in purchases of bank stock were made on Tuesday. The program is designed to inject fresh capital into the nation's banks as a way to encourage them to resume more normal lending.

The nine major banks were called to a meeting with Treasury Secretary Henry Paulson on Oct. 13 where he persuaded them to participate in the program even though some of the institutions argued that they did not need the money being supplied by the government.

Paulson wanted major banks to be unified in participation as a way to remove any stigma from the program. The government has begun striking deals with major regional banks and the goal is to have another $125 billion distributed to potentially thousands of banks by the end of this year, all in an effort to bolster the banks' reserves so they will increase their lending.

On Tuesday, Treasury officials informed representatives of non-publicly traded banks, a group that covers about 6,000 of the nation's 8,500 banks, that they will also be able to participate in the program. Officials said they are moving to modify the contracts so that institutions without publicly traded stock would be able to submit applications.

The government also is being petitioned by a number of other industries, from auto companies to insurance firms, in a bid to get a part of the $700 billion bailout package.