Both Reuters and the Wall Street Journal were reporting on Monday that more than a dozen banks had signed or expressed their intention to sign on to sell preferred stock in return for government funds in the last few days.  They join the original nine financial institutions which signed on to the program at the middle of the month.

The most recent individual deals will involve transferring ownership of a total of about $25 billion in preferred stock to the government in return for its investment. 

The Treasury Department's terms are generous.  The preferred shares will receive a 5 percent dividend for five years, 9 percent thereafter.  Warren Buffet extracted a promise of a 10 percent dividend when he invested in Goldman Sachs in September.  The government will also get warrants to purchase common stock at up to 15 percent of its initial investment.  Common shares are voting stock but Treasury Secretary Henry Paulson has said that the government would not exercise its voting rights.

The original nine banks were apparently required to participate in the government investment deal, even those that felt they were financially sound and did not need the help.  According to some reports the banks' CEOs were virtually held hostage by Paulson over a weekend earlier in the month until they signed the agreements.  Among those selling stock in this initial wave were Wells Fargo Bank, Bank of America, Morgan Stanley, Citigroup, and J.P. Morgan Chase.

The banks that came on board in the last few days did so willingly. While the government's intervention and investment in banks has been billed as a way to loosen the purse strings and encourage bank-to-bank and bank-to-business lending, most of the fourteen banks seemed to view the funds as a way to finance acquisition of weaker banks - a view with which Paulson seems comfortable, maybe even enthusiastic.

Capital One Financial Corp. is the largest of the banks to sign on, selling Treasury $3.55 billion in preferred stocks and warrants, followed by Sun Trust Banks at $3.5 billion.  Sun Trust also announced a 30 percent reduction in its common stock dividend. 

Among others deciding to participate are Fifth Third Bancorp ($3.4 billion,) BB&T Corp. ($3.1 billion,) KeyCorp ($2.5 billion) and Comerica Inc. ($2.25 billion.)

PNC Bank had announced on Friday that it would use a share of the federal money to finance its acquisition of National City Corporation.  The amount it is looking for, $7.7 billion, would put it at the top of this list once signed.

The nine banks initially pressured into joining the program will sell a combined total of $125 billion in stock to the government and an equal amount has been set aside for regional banks which have until November 14 to enroll in the program.

The cash outlay involved in these stock purchases will virtually deplete the initial $350 billion that Congress has given Treasury as part of the bank "rescue" package that was supposed to largely be used to buy up toxic assets.   According to the WSJ, the potential cost of all of this comes to $2.25 trillion, three times the size of the original $700 billion rescue package and now insurance companies (not credit insurance or reinsurers, but real insurance companies like New York Life) are lining up at the trough.

It would be interesting to know exactly what Secretary Paulson is up to.