Washington – President Barack Obama’s economic team sought to ease fears that US banks are on the verge of either collapse or nationalization amid reports Monday that the government is considering a large ownership stake in Citigroup Inc.
The Treasury, Federal Reserve and other government finance agencies issued a rare joint statement assuring investors that the administration “stands firmly behind the banking system during this period of financial strain.”
A so-called “stress test” to review the health of 20 major banks is set to begin on Wednesday. The review could give struggling banks access to more emergency government funds.
Hoping to stem another massive stock market downturn that gripped Wall Street last week, the group also said the government was working under a “strong presumption … that banks should remain in private hands.”
The statement made no specific mention of banking giant Citigroup. The Wall Street Journal reported Obama’s administration may increase its stake in the troubled banking giant to as much as 40 per cent.
The government has already injected 45 billion dollars in Citigroup in exchange for an 8-per-cent stake. (dpa)