WASHINGTON (Reuters) - Some consolidation in the U.S. banking industry might be helpful, but it is not the chief purpose behind a plan to pump $250 billion of new capital into banks, U.S. Treasury Secretary Henry Paulson said on Tuesday.
"I see that they will use this money to lend," Paulson said on PBS' Charlie Rose Show. "Although there will be some consolidation, that's not the driver behind this program."
A text of Paulson's comments was issued in advance of the show's broadcast.
Paulson praised the takeover of Wachovia Corp by Wells Fargo & Co earlier this month, but said Treasury's goal is to get banks feeling confident enough to resume their normal role providing consumers and businesses with the credit they need.
"The driver is to have our healthy banks be well capitalized so they can play the role they need to play for our country right now," Paulson said, stressing that the infusion of capital was intended to go to healthy banks and not to ailing ones.
But he conceded there may be more mergers coming.
"There will be some situations where it's best for the economy and for the banking system for there to be a consolidation," Paulson said. "But again, this is something the regulators are looking at very closely."
Treasury is in the process of pumping $250 billion into the banking system to boost capital and try to induce lending more readily to consumers, businesses and one another.
The money that Treasury is using to add to banks' capitalization is part of a broader $700 billion bailout that Congress approved for financial firms after credit flows virtually seized up, posing a threat to the broader economy.
Paulson said there were signs that the credit freeze -- which affected not only loans to consumers and businesses, but also lending between banks -- was beginning to thaw after a round of measures by Treasury and the U.S. Federal Reserve to boost liquidity and try to bolster market confidence.
Nonetheless, he warned there may be "a number of difficult months" ahead before conditions improve. "We have a resilient economy but it will take time," Paulson said.
The Treasury chief was in New York to speak to the National Committee on U.S.-China Relations. He earlier met corporate executives at the New York Stock Exchange for discussions on the economy and the actions Treasury is taking to spur lending.
In addition to recapitalizing banks, the Treasury is making plans to buy unwanted and illiquid assets from banks in order to help clean up their balance sheets.
(Reporting by Glenn Somerville; editing by Gary Crosse)
