U.S. Could Demand Voting Stakes

The Treasury Department, Federal Reserve, and regulatory agencies announced today that the government might demand direct ownership stakes in major banks if they fail the stress tests that begin today. According to The New York Times, “if a bank comes up short, Treasury officials said on Monday, the government will require it to raise more capital. If the bank cannot get that money from private sources, the government will demand that the bank swap out the government’s existing, nonvoting preferred shares—issued during the first phase of the Treasury’s $700 billion financial bailout program last September—and replace them with new preferred shares that are convertible to common stock with voting rights.”