January 29, 2009

The Obama administration is moving closer to setting up a so-called bad bank in its effort to break the back of the credit crisis and may use the Federal Deposit Insurance Corp. to manage it, two people familiar with the matter said.

U.S. stocks gained, extending a global rally, on optimism the bad-bank plan will help shore up the economy. The Standard & Poor’s 500 Stock Index rose 3.1 percent to 871.70 at 2:40 p.m. in New York. Bank of America Corp., down 54 percent this year before today, rose 84 cents, or 13 percent, to $7.34. Citigroup Inc., which had fallen 47 percent this year, climbed 17 percent.