U.S. Government to Buy up to $1T in Toxic Assets

March 23, 2009

Washington (ChattahBox) — U.S. Treasury Secretary Timothy Geithner will announce details of a three-part plan Monday at  8:45 a.m. Eastern, that will partner it with private investors to purchase up to a trillion dollars or more of toxic loans from the nation’s banks, as well as purchase securities backed by souring loans. These toxic assets, which officials call “legacy assets are mainly billions of dollars in deteriorating residential and commercial mortgage loans underwritten in the real estate bubble and now stuck somewhere in the financial system, limiting lending and acting as a drag on the economy.
The new Public Private Investment Program would combine taxpayer money with private funds, aiming to buy loans and free up banks to renew lending. Geithner told The Wall Street Journal that the plan will involve buying up $500 billion of worth of assets, and the program could be expanded to $1 trillion. As part of the program, the government plans to offer subsidies, in the form of low-interest loans, to coax private funds to form partnerships with the government to buy troubled assets from banks. The Bush administration abandoned its earlier plans to buy up toxic assets in October 2008, and decided instead to use funds from the Tarp (trouble asset relief program) program to recapitalize the banks.


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