Treasury mulling insurer aid program: sources

WASHINGTON (Reuters) - The U.S. Treasury Department is closely studying how it could give relief to bond and mortgage insurance companies under a $700 billion financial services rescue package, two sources familiar with the deliberations said on Friday.

The Troubled Asset Relief Program established by Congress early this month has been seen mainly as a way to recapitalize banks and take bad assets off their books to help support creaking credit markets.

Last week, the Treasury tried to squash rumors the government was preparing to give monoline insurance companies a capital injection, but senior officials are considering how the Treasury might be able to aid state-regulated insurance companies, the sources said.

A leading financial trade group on Friday sent a letter to the Treasury asking that the government interpret its newly won powers broadly in a way that would leave the door open to aid for insurers, automakers and subsidiaries of foreign banks or companies.

(Reporting by Patrick Rucker and Karey Wutkowski; Editing by Tom Hals)