Academic

It's official, sort of.  Hank Paulson has declared Treasury's intention to buy nonvoting equity in troubled financial institutions.  Changing course from a month ago, when he opposed buying equity stakes, Paulson admitted that:

we can use the taxpayers' money more effectively and efficiently, have it go further, get more for their dollars and more protection if we develop a standardized program [to buy equity].

No other details were offered.  The purchases would apparently be part of the $700 BB EESA allocation, and would be under EESA's general authorization.  Paulson's declaration came after the G-7 issued some general principles for a coordinated approach to financial crisis.

UPDATE:  According to NYT, the plan to buy equity "'now emerging as a major part of the rescue effort in the United States."  Treasury may start buying equity stakes in the next two weeks, even sooner than it plans to buy troubled assets.  "Events also seem to have upended the Treasury?s plan to stabilize the financial system by buying billions of dollars of troubled assets from the banks."

As for the proposal to guaranty interbank debt, it looks like it's going to be difficult for the US and other G-7 countries to resist after the UK has done it.  Other countries risk losing bank deposits to the safest haven.  Interesting twist on the dynamics of regulatory competition!