New U.S. bank bailout could cost up to $2 trillion

Thu Jan 29, 2009 6:11am GMT

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(Reuters) - U.S. government officials seeking to revamp the financial bailout have discussed spending another $1 trillion (709 billion pounds) to $2 trillion to help restore banks to health, the Wall Street Journal said, citing people familiar with the matter.

The paper said the Barack Obama administration could announce its plans within days but has not yet determined the final shape of its new proposal, and the exact details could change.

The administration is also seeking more effective ways to pump money into banks, and is considering buying common shares in the banks, according to the paper.

A Treasury spokeswoman told the paper that "while lots of options are on the table, there are no final decisions" on what she described as a "comprehensive plan."

"The president has made it clear that he'll do whatever it takes to stabilise our financial system so that we can get credit flowing again to families and businesses," she told the paper.

The U.S. Treasury has already disbursed nearly $294 billion from the government $700 billion Troubled Asset Relief Program, or TARP to shore up the banking system and faltering U.S. automakers. Billions more have been pledged for particular uses.

A Treasury spokeswoman did not immediately respond to a Reuters email seeking comment that was sent after normal business hours.

The WSJ said another way being considered for the government to inject money into banks is the purchase of convertible bonds, in which the government would be paid interest now but have the option to get common equity later.

(Reporting by Ajay Kamalakaran in Bangalore; Editing by Anshuman Daga)

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