After a roller-coaster session highlighted by a surge in Wachovia Corp. shares and a steep fall for Bank of New York Mellon Corp. and State Street Corp., bank stocks surged in late trading Thursday after reports began to surface that the federal government may create a repository for banks' bad debt.

According to a CNBC report Wednesday afternoon, Treasury Secretary Henry Paulson was "shopping" a proposal to members of Congress to create a facility similar to the Resolution Trust Corp., which was established during the savings and loan crisis of the late 1980s to absorb the assets of failed thrifts.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.