Search

The authors argue in favor of letting private equity recapitalize troubled U.S. banks. They cite some limitations of the guidelines to govern private-equity investment in failed banks released by the Federal Deposit Insurance Corp. (FDIC). They also call on the FDIC to follow the experience of the Federal Reserve in the area where no investor has control of a bank.

The article examines the potential of private equity firms to save investment banks in the U.S. It says that the ownership of private equity in regulated depositary institutions is limited by an array of policies and administrative interpretations. The authors argue that the strict limitation on capital investment can be modified by administrative intervention that is consistent with laws covering depositary institutions. They state that the private equity is willing to invest in large amounts by restoring lending capacity and safeguarding the taxpayer.