Nov. 4 (Bloomberg) -- Treasury Secretary Henry Paulson is considering taking stakes in non-bank financial companies after already allocating $250 billion for government investments in banks, two people briefed on the matter said.

Paulson hasn't made a final decision, and the department is still looking at how the potential program would work, one official and a person briefed by the Treasury said on condition of anonymity. Companies that could be helped include General Electric Co.'s GE Capital unit and CIT Group Inc., they said.

The move would expand the $700 billion rescue package, which has up to now focused on cash infusions for banks. It also could slow Treasury's effort to purchase assets that clog companies' balance sheets. The department may revise that plan and abandon the use of reverse auctions to value the troubled securities, the official said.

``We are looking at many ideas for strengthening the financial system and for restoring lending,'' said Treasury spokeswoman Jennifer Zuccarelli, who declined to comment on any specific companies. ``We are weighing ideas and have made no decisions.''

Extending the bailout to finance companies may increase lobbying by other industries seeking federal funds. Auto companies and their finance arms, in particular, have pressed Paulson for a capital injection, though he has thus far refused. The Treasury is also looking at whether some insurers could be eligible.

Competition Concern

Taking stakes in non-bank financial firms will likely delay Treasury's efforts to buy toxic securities. The department has yet to hire private firms to oversee those purchases.

Paulson originally sold the bailout to Congress as a program for spurring lending by taking the troubled assets off banks' books. Within a week of the law's Oct. 3 passage, the Treasury shifted its emphasis to the bank equity purchases.

In running the so-called Troubled Asset Relief Program, Paulson has sought to provide assistance to firms that lend to a broad array of businesses and consumers with the hopes the money unfreezes the credit markets. Non-bank finance companies have argued that the government stakes in banks are putting them at a competitive disadvantage.

CIT Group is the largest U.S. independent commercial lender. The company has lost about three-quarters of its market value this year and has reported losses in six consecutive quarters.

`Considering' Options

``To ensure liquidity flows to small and mid-size businesses, CIT is currently considering a variety of options to build its deposit-taking capabilities and secure access to various government programs, including TARP,'' said spokesman Curt Ritter.

GE spokesman Russell Wilkerson said in an interview that an expansion of Treasury plans to include non-bank financial firms ``is not something we expect.'' Still, he added that: ``We have had regular contact with Treasury during the financial crisis on a number of topics. If it were offered, we would evaluate it.''

GE Capital, a unit of Fairfield, Connecticut-based GE, is the biggest issuer of commercial paper in the U.S., and has two banks that are subject to holding company supervision by the Office of Thrift Supervision.

GE Money Bank Inc., a Federal Savings bank, and GE Capital Financial Inc., an industrial loan company, issue certificates of deposit, which are insured by the Federal Deposit Insurance Corp. Deposits at GE Capital have risen by $22 billion to $33.5 billion as of Sept. 30, the company said in its quarterly filing. GE Capital also owns nine banks outside the U.S. that take deposits.

The Financial Services Roundtable, a trade association of the 100 largest banks, securities firms and insurers, has been pressing Treasury to broaden its guidelines so that insurance companies, broker-dealers, automobile companies and institutions controlled by foreign banks could also sell stakes to the government.

The plans to possibly extend the capital injections were reported earlier by the Wall Street Journal.

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.

Last Updated: November 4, 2008 12:57 EST