“U.S. to Buy Stakes in Nation’s Largest Banks”

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The U.S. government is expected to buy stakes in the nation’s top financial institutions as part of a wide-ranging effort to restore confidence to the battered banking system, following similar moves by European governments that sent global stock markets soaring.

Morgan Stanley CEO John Mack (L) and Citigroup CEO Vikram Pandit leave a meeting at the Treasury Department.

As part of its new plan, the government is set to buy preferred equity stakes in Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp., Merrill Lynch, Citigroup Inc., Wells Fargo & Co., Bank of New York Mellon and State Street, according to people familiar with the matter.

Not all of the banks involved are happy with the move, but agreed under pressure from the government. All told, the moves tie the banking sector to the federal government for years to come. The comprehensive approach rivals the breadth of the government’s response to the Great Depression. As a result, taxpayers now have a direct stake in the future of American finance. Along with the government’s involvement come certain restrictions, such as caps on executive pay.