Fed Loosens Reins on Private Funds Buying Into Banks

The Fed has loosened the rules that curtailed private investments in banks, the Wall Street Journal reports. The move may inject more cash into the financial system—if private equity chooses to invest—but will raise fears of profit-hungry investors snapping up stakes in banks to make quick cash with risky loans.

Under the new rules, an investor can take a stake of up to 33% in a bank without being deemed a controlling investor—a designation that would open up the investor to direct scrutiny from the Fed. Some experts say the relaxed rules don't mark a complete turnaround for the Fed, but may encourage investors to help shore up a banking industry that hasn't had any big injections of investor cash since April.
(More Federal Reserve stories.)