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A Winner for Treasury? Time Will Tell

Matthew Cavanaugh/European Pressphoto Agency

Henry M. Paulson Jr., left; Ben S. Bernanke, center; and Timothy F. Geithner, of the New York Federal Reserve.

The Treasury Department will make substantial profits on its investments in banks under the bailout program announced Tuesday — if the banks return to health within a few years. If not, the government could end up breaking even, or perhaps even lose money.

Matthew Cavanaugh/European Pressphoto Agency

Treasury Secretary Henry Paulson Jr., speaking, in Washington. The government could recoup its investment to end the credit crisis, but only if the banks recover.

In a number of ways, Washington’s proposal comes with fewer strings attached than the rescue plans in European countries. That would seem to place the American government at a disadvantage, but Washington could benefit if that relative leniency helps banks recover quickly and provides a big profit on the equity stake it is receiving.