RAISE CAPITAL THROUGH GOVERNMENT INVESTMENTS

Undercapitlized banks would have the option of turning to the government for investment immediately or later if they have trouble raising private capital. Washington's previous bank investments have come with strings attached, like limits on executive pay. The tough terms are expected to encourage firms to work hard to find private investors.

MORE EXTREME MEASURES; NO 'NATIONALIZATION'

If a bank was in desperate need of capital and in danger of failing, officials could take other extreme measures. With the memory of Lehman Brothers' failure last year fresh in their minds, top officials have said they will not let any systemically important firm fail. The Obama administration has asked Congress to quickly give the government the ability to take control of large, interconnected financial firms to wind them down. The administration's proposed legislation would also give the Federal Deposit Insurance Corp the power to make loans to a troubled firm while keeping it open, buy a stake in the firm, assume obligations, take a lien on the firm's assets, or sell off the firm's assets. (Reporting by Patrick Rucker and Karey Wutkowski; Editing by Jonathan Oatis)