U.S. wants to keep banks private in new rescue plan

NEW YORK WASHINGTON -- Federal regulators pledged Monday to do all they can to shore up the struggling banking system while keeping banks "in private hands" as they plan to launch a revamped program to inject capital into financial institutions on Wednesday.

The new plans are the Obama administration's latest attempt to bolster the banking system without nationalizing any institutions, which the White House has said it does not intend to do.

The Treasury Department, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, Office of Thrift Supervision and the Federal Reserve jointly issued a statement about the plan Monday amid growing concern that some of the country's biggest banks may need additional assistance to survive the worst financial crisis since the 1930s.

The new program — a crucial component of President Barack Obama's strategy for handling the $700 billion financial bailout — would give the government greater flexibility in dealing with troubled banks.

In a new twist, regulators have the option of allowing the government to boost its ownership in banks without having to pour more taxpayer money into them. That would be done by converting the status of the government's shares in a financial institution from preferred stock to common stock.

Still, the regulators suggested keeping banks private is a priority.

"Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption (of the program) is that banks should remain in private hands," the regulators' statement said.

The regulators on Monday did not name any banks or respond to reports that the government is considering increasing its ownership of Citigroup.