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“Lifting the short ban restores the balance in the marketplace,” said Peter Sorrentino, a money manager at Huntington Asset Advisors in Cincinnati, which oversees $16.5 billion. “It should bring liquidity back into the market, which will cap some of the volatility we’ve seen lately.”

Treasury Secretary Henry Paulson signaled the government may take limited ownership in banks as the next step in trying to resolve the deepening credit crisis. Mr. Paulson said Wednesday that a $700 billion bailout plan that Congress passed last week to rescue financial institutions gave him broad authority that he intends to use, beyond just buying mortgage-related assets on banks’ balance sheets. He indicated that an option available may be boosting companies’ capital with cash infusions. “It is the policy of the federal government to use all resources at its disposal to make our financial system stronger,” Paulson said. “We will use all of the tools we’ve been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size.”

Meanwhile, fewer Americans filed first-time applications for unemployment benefits last week, but the number of people staying on benefit rolls climbed to the highest level in five years.

Initial jobless claims declined by 20,000 to 478,000 in the week that ended Oct. 4, compared with 498,000 the prior week, the Labor Department said Thursday.

Hurricanes Gustav and Ike, which hammered the coasts of Texas and Louisiana late summer and forced the evacuation of more than 2 million people, have distorted claims figures in recent weeks. Last week’s figures included about 17,000 applications from storm-related job losses, down from close to 50,000 in the previous two weeks, the department said.

The U.S. unemployment rate remained unchanged at 6.1 percent.

This article is based in part on wire service reports.