The Treasury official overseeing the government's $700 billion financial bailout plan on Friday defended banks that want to use federal money to buy competitors.
Treasury doesn't want to “micromanage” banks that get capital infusions under the bailout, Assistant Treasury Secretary Neel Kashkari said at the Wharton Finance Conference in New York.
“Prudent mergers and acquisitions can be good for our financial system and our communities,” Kashkari said.
Recipients of financial bailout money include Bank of America Corp. and Wells Fargo & Co., which is buying Charlotte-based Wachovia.
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If a large stable bank acquires a community bank that is struggling, the smaller bank's ability to lend is preserved, he said.
Some federal money already has been committed to an acquisition. PNC Financial Services Group Inc. last month said it would buy National City Corp. for $5.8 billion, the first use of federal bailout money for an acquisition. PNC received $7.7 billion from the government.
Treasury has said it will devote $250 billion of the bailout money to buy stakes in banks. Other industries, such as U.S. automakers, have been clamoring for shares of the remaining bailout funds.
But will Treasury be giving aid to other sectors? “We haven't ruled anything in or anything out,” Kashkari said. “We want to put the capital to its best use.”
Kashkari, 35, said everyone in Treasury was preparing for the transition to the next administration.
President-elect Obama, in his first news conference since winning the election, on Friday said that Congress must pass an economic stimulus measure either before or just after he takes office in January, and that unemployment benefits need to be extended. But Obama deferred to President Bush and his economic team on major decisions in the coming weeks.
“Transitions are always complicated,” Kashkari said. “We're going to do everything we can to make sure it's absolutely seamless.”
Kashkari said his own next career move is unclear. “I'm just trying to get through Jan. 20,” he said. “I have no idea what I'll do afterward.”