Fed May Give Private Equity More Leeway to Help Banks

Wall Street Journal (06/27/08) P. C1; Enrich, David; Sidel, Robin; Paletta, Damian
The Federal Reserve may soon make it much less difficult for private equity firms and others to invest in cash-strapped lenders anxious to secure capital. The move to open up the private equity pool comes as regulators grow more and more concerned about the ability of some banks to replenish capital amid the most severe banking crisis in years. Small and regional lenders likely will have the toughest time securing new investors, especially since some recent capital infusions have saddled banks' new shareholders with hefty losses. Under federal law, to own more than 24.9 percent of a bank, an entity must register as a bank holding company and be subjected to heavy regulation—a law the Fed cannot change, although it does have a certain amount of leeway in how it interprets the legal ins and outs.