The US Treasury Department is likely to unveil as soon as next week a three-part plan to relieve the US financial system of the toxic assets that have been clogging up the banks' balance sheets, a source familiar with the plan said today.
The government is planning to set up an entity run by the Federal Deposit Insurance Corp to provide low-interest loans to private capital to buy up the banks' soured assets, many of which are tied to mortgages and have tumbled in value, the source said.
The Treasury will hire outside investment managers to run public-private partnerships to buy up the troubled mortgages, with government capital matching private capital contributions, according to the source.
Finally, the Federal Reserve will expand its Term Asset-Backed Securities Loan Facility, known as TALF, to also buy so-called "legacy" assets, the source said. The legacy assets are older securities that have been causing much stress to the banking system and have not been eligible for the TALF before.
The source said the exact timing of when the Treasury will unveil the plan is unclear because Treasury would first like to resolve the issue of executive bonuses, which lawmakers are trying to restrain for institutions involved in government rescue efforts.
Meanwhile, President Barack Obama said he would not accept treasury secretary Timothy Geithner's resignation if it was offered, according to excerpts from a television interview to be broadcast on Sunday.
Mr Obama said he would tell Mr Geithner: "Sorry buddy you've still got the job."
The treasury secretary has been under fire from some lawmakers for his handling of the AIG bonus scandal.
US television network CBS, which secured the interview, said Mr Obama told its "60 Minutes" program that neither he nor Geithner had mentioned his resignation from his Treasury post.
Reuters