Bank of New York Mellon said yesterday the U.S. Treasury has hired it to manage the books for the federal government's $700 billion plan to stabilize the nation's financial system.

Terms of the three-year contract won't be disclosed until the federal agency completes negotiations with the firms that will manage the portfolio of securities Treasury will purchase as part of the largest bailout in U.S. history. Those securities include troubled mortgages as well as bank stock.

Treasury said yesterday it would purchase $250 billion in preferred shares from nine banks, including $3 billion from Bank of New York Mellon. The purchases are intended to restore confidence and stability in global financial markets.

"This represents a massive infusion of critical new capital into the U.S. banking system," said Global Insight economist Brian Bethune.

Mr. Bethune believes that given the amount of toxic debt clogging credit markets, $700 billion may not be enough. Requests for more money could be made once the elections are over or early next year, he said.

Under the Treasury contract, Mellon will be the custodian for the cash and securities in the portfolio, maintain accounting records and manage auctions when Treasury decides to sell securities in the portfolio.

Bank of New York Mellon currently is the custodian for about $23 trillion in assets. Spokesman Ron Gruendl said it was conceivable some of the work for Treasury would be done in Pittsburgh. He declined comment on whether Bank of New York Mellon was competing for a portion of the asset management business.

Treasury spokeswoman Jennifer Zuccarelli said the contract includes four one-year options to keep Bank of New York Mellon once the three-year term expires in Oct. 2014.

Shares of the bank advanced 13 percent yesterday, finishing at $34.76, up $4.08. Other local banks closing higher included National City, up 80 cents to $3.10; AmeriServ Financial, which rose 36.5 cents to $2.765; and ESB Financial, up 89 cents to $9.89.

PNC Financial Services Group fell nearly 8 percent, closing at $63.04, down $5.31.