Fed Explores Steps to Channel Funds to Cash-Strapped Banks

In a move that could facilitate the flow of capital to cash-strapped banks, the Federal Reserve is considering steps to make it easier for private-equity firms and others to invest in banks, according to regulators and other people familiar with the matter. Under federal law, to own more than 24.9% of a bank, an entity must register as a bank holding company, which is subject to heavy regulation and can be forced to serve as a "source of strength" for the bank. Ownership of more than 9.9% of a bank also subjects the entity to regulatory scrutiny to ensure that it isn't controlling – or even influencing – the bank's operations