Fed looks at making bank investing easier

WASHINGTON (AP) — The Federal Reserve is looking into making it easier for private equity firms to invest in banks, a move that could usher new capital infusions to cash-hungry banks and help them cope with credit problems.

Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson have been encouraging banks to raise more money to rebuild balance sheets that have been hit by billions of dollars in losses from bad investments in mortgage-backed securities.

A global credit crisis and financial turmoil have made it increasingly difficult for banks, Wall Street firms and other financial institutions to line up capital.

The Fed is considering taking steps that would help give private equity firms a better understanding of what they can and cannot do as they weigh making an investment in a bank.

“We are looking at ways we can make those things more workable and gain from the experience we’ve had over the past few years,” said Scott Alvarez, the Fed’s general counsel.