Financial firms who sold stock to the Treasury earlier this week will be allowed to include the senior perpetual preferred stock they sold in their Tier 1 capital. The Federal Reserve announced the interim rule Thursday.
The press release said the rule would provide guidance to banks concerning "the regulatory capital treatment of such senior perpetual preferred stock" and would speed up the transaction process between them and the government.
The rule is in effect as of Friday.
Earlier this week, U.S. Treasury Secretary Henry Paulson announced the government would buy $250 billion worth in financial firm equities from the nation's top nine financial firms, including giants JPMorgan and Citigroup. In an interview with CNBC Wednesday night, Paulson said the buyout was "anything but a nationalization," and said "these are temporary investments to bring confidence to the system."
By Megan Ainscow
©CEP News Ltd. 2008