U.S. expects profit from bailout

WASHINGTON — Treasury Secretary Henry Paulson said Monday that government purchases of banks’ stocks represent an investment that would make money for taxpayers.

While the initiative started with $125 billion set aside for nine of the country’s biggest banks last week, Paulson stressed that the program is ready to purchase $125 billion more in stock from banks.

To protect the taxpayers’ investment, Paulson said, the government will own shares in the banks that should be paid back with a reasonable return. The government also will receive warrants for common shares in the participating banks.

"This is an investment, not an expenditure, and there is no reason to expect this program will cost taxpayers anything,” Paulson said at a Treasury briefing.

He said the program had been designed to attract participation from healthy institutions across the country and help credit flow by increasing confidence. He added there already had been interest from "a broad group of banks of all sizes.”

Officials said the $125 billion was enough for the government to buy stock from the banks so they could improve finances and make additional loans. The effort is seen as a quick way the government can attack the current financial crisis that is threatening to push the U.S. into a deep recession.

Paulson said banks taking part in the stock purchase program must follow guidelines limiting executive compensation. Paulson said all stock sales to the government would be announced within 48 hours of their execution.