Treasury Unveils Toxic-Asset Plan, Citing ‘Acute Pressure’ on Banks
The Treasury Department unveiled its plan to deal with the toxic assets weighing on banks’ balance sheets Monday, acknowledging that the financial system continues to face “acute pressure” and is working against economic recovery.
The coordinated effort of the Treasury, Federal Reserve and Federal Deposit Insurance Corp. will attempt to address the issue of “legacy” real-estate-related assets that Treasury Secretary Timothy Geithner said is reducing banks’ willingness to take risks and to lend money to consumers.
“This will help banks clean up their balance sheets and make it easier for them to raise private capital,” Mr. Geithner said.
The plan calls for the federal government to work with private investors to try to restart the market for the troubled mortgage loans and securities, which in turn officials hope improves the financial condition of banks that have received billions in capital injections from the government already. The federal government will pair as much as $100 billion with private capital to generate $500 billion in purchasing power to buy the assets, and Mr. Geithner told reporters the plan could reach $1 trillion in size over time.
This article was originally posted on WSJ.com