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Geithner says toxic asset plan close to finished

Geithner says toxic asset plan close to finished

The Obama administration will unveil within the next couple of weeks its plan for dealing with the toxic assets that lie at the heart of the financial crisis, Treasury Secretary Timothy Geithner said Tuesday.
Geithner said the plan the administration has put together will provide government financing to private investors who are willing to buy the bad assets clogging banks' balance sheets. He predicted the plan will succeed but he said it will take time to resolve the crisis.
"It's going to take a lot to work through this," Geithner said in an interview Tuesday on "The Charlie Rose Show." "We start with a _ just a deep mess. ... We are going to keep at it until we fix it."
The administration believes that by getting the bad loans and other troublesome assets off banks' books, it will encourage financial institutions to resume more normal lending to consumers and businesses.
Geithner unveiled the administration's overhaul of the government's $700 billion financial rescue program on Feb. 10 but financial markets took a nosedive, with investors expressing disappointment with a lack of details, particularly on the plan to develop a public-private partnership to deal with banks' toxic assets.
In his interview Tuesday, Geithner said the plan to provide government financing for investors buying the bad assets is aimed at getting markets operating again.
"We think we can make a meaningful difference in starting to open up these markets," Geithner said. "There's capital that wants to come into the system, but just can't get financing."
While the administration has said at the moment it does not need more than the second $350 billion chunk of the bailout fund to finance its new programs, it sent Congress a budget two weeks ago that has a "place holder" for up to $750 billion more in bailout spending, an amount that would more than double the current rescue fund.
Asked about the adverse market reaction to his Feb. 10 announcement, in which the Dow Jones industrial average plunged by 380 points, Geithner said that the plan had always been to describe in broad outline of what the administration intended to do, with the specific details coming later.
"We're going to move in the next couple weeks to lay out the precise terms of this facility," Geithner said. "People will see how it's going to operate. And then it will go into place over the following weeks and months."
Geithner said the government loans would carry interest rates that will support lending during a crisis period but not be on such favorable terms that the investors buying up the toxic assets would want to keep borrowing from the government when the economy starts to improve.
In addition to discussing the government's proposal to provide financing for private investors to purchase toxic assets, Geithner also discussed the "stress tests" that regulators are performing on the country's 19 biggest banks to see if they have sufficient resources to survive an even more severe economic downturn.
Geithner refused to call the 19 biggest banks "too big to fail" but he said if it is determined that some need "temporary assistance" from the government to get through the current economic troubles, that assistance will be provided.
"We're going to make sure (the assistance) comes with appropriately tough conditions so that they emerge stronger," Geithner said.
The billions of dollars in government support to the financial system are not being provided to protect particular banks but to prevent an even more severe recession, he said.
"We're doing it to save the American economy from the cost of more failures of viable businesses and more trauma to the average American family," he said.
At the moment, Geithner said the recession was intensifying not only in the United States but around the world.
"We start with this deepening recession, intensifying housing crisis, a deep fiscal hole in the financial system that's in some ways very damaged," he said.


Updated : 2021-07-29 08:04 GMT+08:00