The US Treasury Department official charged with implementing the government's financial rescue plan said today that markets were improving in response to proposals to inject capital into banks.
"Since the announcement of our capital purchase program, we have seen numerous signs of improvement in our markets and in the confidence in our financial institutions," Neel Kashkari, Treasury's interim assistant secretary for financial stability, said in prepared testimony for delivery to the Senate Banking Committee.
But, he added, "the markets remain fragile."
Treasury said on October 14th it was pumping $250 billion into US banks, part of a $700-billion congressionally approved bailout package that eventually is also to include purchasing unwanted and illiquid mortgage assets from banks to cleanse their portfolios.
The government will take equity stakes in the banks that pay dividends.
Mr Kashkari repeated that the action to aid banks should be considered an investment that may make money for taxpayers:
"The government will not only own shares that we expect will result in a reasonable return, but also will receive warrants for common shares in participating institutions."
Any banks in the program will have to strengthen efforts to help struggling homeowners avoid foreclosures, Mr Kashkari said.
Private-sector analysts have warned that a rising number of mortgage-holders are near the point where they owe more on their mortgage loans than their houses are worth, heightening the risk that the pace of foreclosures will escalate sharply.