Sixteen U.S. banks sign up for government funds

By Jonathan Stempel

NEW YORK (Reuters) - Sixteen U.S. banks including BB&T Corp, Capital One Financial Corp and SunTrust Banks Inc have accepted more than $33 billion (21 billion pounds) of U.S. government cash, as speculation turned to which lenders might not qualify for help.

The infusions are part of the second phase of a $250 billion recapitalization program launched this month by U.S. Treasury Secretary Henry Paulson.

Governments worldwide are trying to prop up banks whose capital has been hit by the credit crisis as part of efforts to stave off a potentially deep global economic recession.

Treasury is providing funds, in exchange for preferred stock and warrants, to a group of 20 to 22 lenders. In an earlier round of financing, the department committed $125 billion to nine of the nation's largest banks. The infusions are part of the $700 billion Troubled Asset Relief Program (TARP) that became law this month.

"Investors should look at the infusions as a positive for those that participate," said Kevin Fitzsimmons, a banking analyst at Sandler O'Neill & Partners LP. "Over the next week, we may get a better idea of who is getting approved and who may not be. Perhaps there will be more scrutiny then of lenders we haven't yet heard from."

The government hopes banks will use funds to help unlock credit markets, rather than hoard the cash, though some are expected to use money to buy weakened rivals.

On Friday, PNC Financial Services Group Inc said it would buy National City Corp, the ailing Cleveland lender, with help from a $7.7 billion government infusion.

Treasury is letting banks announce infusions, rather than release a complete list and frighten investors into believing that banks left off the list failed to qualify for help.