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Geithner lays out toxic asset plan
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03/23/09 04:57 AM ET
Treasury Secretary Timothy Geithner's plan for the country's financial system is likely to drive the conversation through first few days of this week. Geithner laid out the plan in an op-ed in the Wall Street Journal Monday, and the roll out has been kind of impressive; the administration had front page stories on part of the plan on the big 3 papers every day of the weekend and Monday.
The main parts of the plan and, specifically, the public-private structure that will buy up toxic
Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets.
The new Public-Private Investment Program will initially provide financing for $500 billion with the potential to expand up to $1 trillion over time, which is a substantial share of real-estate related assets originated before the recession that are now clogging our financial system. Over time, by providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets. The ability to sell assets to this fund will make it easier for banks to raise private capital, which will accelerate their ability to replace the capital investments provided by the Treasury.
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The main parts of the plan and, specifically, the public-private structure that will buy up toxic
Third, private-sector purchasers will establish the value of the loans and securities purchased under the program, which will protect the government from overpaying for these assets.
The new Public-Private Investment Program will initially provide financing for $500 billion with the potential to expand up to $1 trillion over time, which is a substantial share of real-estate related assets originated before the recession that are now clogging our financial system. Over time, by providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets. The ability to sell assets to this fund will make it easier for banks to raise private capital, which will accelerate their ability to replace the capital investments provided by the Treasury.
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