Treasury Is Working To Widen the Rescue

"Continuity is in the best interests of the markets and the economy," Treasury spokeswoman Michele Davis said. "But a change in an administration is likely to bring some changes, and we all recognize that."

Treasury also wants to give its initial $250 billion program a chance to work, government officials said. Those who engineered this strategy think it is far too early to say whether it has worked but say it has shown enough promise to continue expanding the effort.

The efforts have tentatively improved conditions in financial markets compared with the paralysis that was taking hold in the middle of last month. And while many on Capitol Hill have criticized decisions by some banks to use the federal money to take over weaker competitors, leaders of the Treasury and Federal Reserve see benefits to that activity because this has reduced uncertainty in the marketplace by resolving the fate of banks that otherwise would have failed.

But officials at the Treasury and the Fed face a challenge in deciding who to help outside the traditional banking sector. With banks, the determination is simpler for regulators because they are more familiar with the operations of these firms. Officials have less experience overseeing other kinds of companies.

The companies that have the best chance to receive government capital could be those that resemble banks -- in that they borrow money and then lend it to businesses or consumers -- even if these financial firms are not chartered as banks. Treasury officials are trying to evaluate which companies could become a bank or thrift holding company and be viable in the long run with government help, as opposed to those fated to fail.

Normally, the process of acquiring a charter as a bank or thrift holding company takes at least one month. But the Fed has shown a willingness to act much faster. Two months ago, it approved the conversion of investment banks Goldman Sachs and Morgan Stanley into bank holding companies in a matter of hours.

Toni Simonetti, a spokeswoman for GMAC, said her company has few options for raising money other than from the government and is now applying to become a bank holding company. The company's financial troubles mean it cannot lend to dealerships that need loans to buy vehicles for their lots or to people who want to buy cars.

"We've had such a difficult time getting access to funding," Simonetti said. "All of these financing tools are now at the government, but you have to be a bank holding company to have access to them. . . . We are definitely at the government's mercy." GMAC has been in close consultation with the Treasury and Fed about its plans to restructure, she said.

GMAC and other firms could face difficulties because of a long-standing rule that a commercial business cannot own more than 24.9 percent of a bank. General Motors owns a 49 percent stake in GMAC.

Moreover, to become a bank holding company, firms would be required to raise more capital. The Fed would prefer they raise at least some private money in addition to any injection from the Treasury. Yet the troubled markets make it hard for a financial company to raise private capital.

Some insurers, such as Prudential and MetLife, are organized as a bank or thrift and would be permitted to receive a capital injection from the government. Insurers that do not fit the definition, however, would have to restructure themselves to participate. Those who do not could be placed at a disadvantage.

The Hartford Financial Services Group, the large Connecticut-based insurer, is not a thrift or a bank, but a spokeswoman said it would consider participating in a federal capital injection program.

"We would evaluate participating, should it be available to us," Hartford spokeswoman Shannon LaPierre said.

Likewise, executives with insurer Lincoln Financial Services Group signaled they would consider restructuring as well. In an earnings call last week, president and chief executive Dennis R. Glass was asked whether he'd be reluctant to become a bank holding company to participate in the federal program.

"Based on what I know," he said, "the answer is we would do that."