Washington in market to purchase toxic assets
WASHINGTON - Struggling to contain the worst financial crisis in seven decades, the Obama administration wants to buy billions of dollars of toxic assets from banks to ease borrowing for consumers and businesses.
Some industry officials familiar with the details said yesterday that they expected Washington would try to remove as much as $1 trillion from banks' books. An announcement from Treasury Secretary Timothy F. Geithner could come as early as tomorrow.
If banks are not burdened by the soured loans, they would be in better shape to resume more normal lending.
According to administration and industry officials, the plan would rely on the Federal Reserve and the Federal Deposit Insurance Corp. to supplement the government's $700 billion bailout fund. The uproar over the millions of dollars in bonuses for employees at troubled insurance giant
The officials, who spoke on condition of anonymity because the details have not been announced, said Geithner's plan will have three major parts:
A public-private partnership to back private investors' purchases of bad assets. The $700 billion bailout fund would provide the backing, and the government would match private investors dollar for dollar and share profits equally.
Expanding a recent Fed program that provides loans for investors to buy securities backed by consumer debt, an effort to make it easier for people to get auto, student, and credit card loans. The Term Asset-Backed Securities Loan Facility program is getting up to $100 billion from the bailout fund; that money then is being leveraged to support up to $1 trillion in Fed loans. Under Geithner's plan for the toxic assets, part of that $1 trillion would now go to support purchases of banks' troubled assets.
Using the FDIC, which guarantees bank deposits, to purchase toxic assets. Officials said the agency would create special investment partnerships and then lend them money to buy troubled assets.
Industry officials said the administration had not disclosed the exact amounts of money to be devoted to the effort.
