Posted on 10 Feb 2009
Treasury Secretary Timothy Geithner announced the US Treasury Department's revamped financial rescue plan to clean up to $500 billion in spoiled assets from banks' books and support $1 trillion in new lending through an expanded Federal Reserve program.
The renamed "Financial Stability Plan" will also devote $50 billion in federal rescue funds to try to stem home foreclosures and soften the crushing impact of the deep housing crisis now afflicting the entire economy.
The Treasury said a public-private investment fund will be established, seeded with government money, to leverage private capital so that so-called toxic assets can be sponged out of the faltering banking system.
The hope is that that will enable banks to resume lending.
Geithner acknowledged that deep skepticism has developed over the fairness and efficiency of a $700 billion bank bailout program approved by Congress in October.
He said leaders of some financial institutions that have received money had squandered the good faith that is needed to make the bank rescue effective.
"The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to public distrust," Geithner said.
"I want to be candid: this comprehensive strategy will cost money, involve risk, and take time," Geithner said in a widely anticipated speech. "We will have to adapt it as conditions change. We will have to try things we've never tried before. We will make mistakes. We will go through periods in which things get worse and progress is uneven or interrupted."
The financial-rescue plan contains a number of measures meant to ease the credit crunch, including a public-private initiative to take bad assets off of banks' balance sheets, mortgage loan and foreclosure relief and a new consumer lending initiative.