The Treasury is said to be beefing up the biggest banks with $$$: Goldman, JP Morgan, and more

The U.S. Government is said to be on a buying spree, taking a page out of Warren Buffett's playbook, scarfing up preferred shares (designed to be nondilutive to the common stock) of the nations biggest banks -- including Goldman Sachs and Citigroup -- in exchange for big wads of cash.  The institutions apparently didn't have any choice in the matter, and each of the banks will have to adhere to the compensation restrictions imposed by Congress.  Hank Paulson, Ben Bernanke and FDIC Chairman Sheila Blair will hold an 8:30 am press conference tomorrow morning to discuss the investments  as well as ``a series of comprehensive actions to strengthen public confidence in our financial institutions and restore functioning of our credit markets.''.  According to Bloomberg:

The cash injections in exchange for preferred shares are part of a $700 billion rescue approved by Congress and follow similar moves by European leaders to unfreeze global credit markets by helping beleaguered banks. The other companies are Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of New York Mellon Corp., said people briefed on the plan.

``It's a good thing, it's what needs to happen, it will allow the markets to start functioning again,'' said Ralph Cole, a vice president for research at Ferguson Wellman Capital Management Inc. in Portland, Oregon, which oversees $2.7 billion including shares in JPMorgan, Wells Fargo and Goldman.

The Treasury plans to spend $25 billion each for stakes in Citigroup and JPMorgan, people said. Another $25 billion will be divided between Bank of America and Merrill, which agreed last month to be acquired by Bank of America. Wells Fargo is to get at least $20 billion, Goldman and Morgan Stanley will each get $10 billion, and State Street and Bank of New York will get about $3 billion each, people said.

Another $125 billion will be used to recapitalize other financial institutions around the country, the people said. Neel Kashkari, the U.S. Treasury official overseeing the rescue of the financial system, earlier today said the equity purchases will be aimed at ``healthy'' firms.

U.S. Treasury Said to Invest in Nine Major U.S. Banks - Bloomberg