WSJ: Treasury Could Add Private Cap Requirement To TARP

(Reuters) – The Treasury Department, signaling a new phase in its $700 billion financial rescue plan, is considering requiring that firms seeking future government money raise private capital in order to qualify for public assistance, the Wall Street Journal said, citing people familiar with the matter.

The move is not expected to apply to the existing $250 billion capital-purchase program, which is already injecting money into banks, the paper said.

Treasury is considering attaching such conditions to any of its future capital investments, the people told the paper.

At the same time, Treasury is unlikely to conduct any auctions to purchase bad loans and other troubled assets, the original intention of the $700 billion rescue plan, the paper said.

Instead, Treasury is expected to continue focusing its firepower on injecting capital directly into the financial sector, the people told the paper.

Treasury Secretary Henry Paulson may outline some of these changes Wednesday, when he provides an update on Treasury’s Troubled Asset Relief Program (TARP), the paper said.

Treasury could not be immediately reached for comment by Reuters.

The Journal also reported that U.S. bank regulators could announce guidelines this week designed to encourage U.S. banks to remain active lenders as financial markets are squeezed.

The regulatory guidelines could also address sensitive issues of bank dividend payments and executive pay, the paper said.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Ben Tan)