Paulson Says Stock-Buying Aimed at `Regulated' Firms

By Peter Cook and Rebecca Christie

Oct. 16 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson said his plan to inject capital into financial companies is focused on banks and thrifts, indicating unregulated firms such as hedge funds won't initially get government aid.

``Right now we're focused on financial institutions, regulated financial institutions,'' Paulson said in an interview with Bloomberg Television, when asked whether hedge funds might also be eligible. ``The program right now is for banks and thrifts.''

Paulson pushed Congress to pass a financial rescue package that gives him broad authority to pump money into cash-strapped banks. Earlier this week, he said the first $250 billion of the overall $700 billion rescue would go into the balance sheets of financial companies in exchange for non-voting, preferred equity.

U.S. stocks have fallen for three straight days since Paulson's Oct. 14 announcement of the equity purchases. The Standard & Poor's 500 Index yesterday dropped 9 percent and fell much as 3 percent today.

``You don't want to react too much to the equity market any single day,'' Paulson said in the interview. ``But if you look at credit spreads, if you look at some of the indicators that I look at every day, there's no doubt in my mind we've done the right things.''

To contact the reporters on this story: Peter Cook in Washington at pcook6@bloomberg.net; Rebecca Christie in Washington at Rchristie4@bloomberg.net.