U.S. Treasury unveils toxic assets plan
Posted on: Monday, 23 March 2009, 14:41 CDT
The U.S. Treasury unveiled its plan to free banks from frozen assets Monday, using a partnership with the private sector to give more clout to taxpayer dollars.
In a White House briefing, U.S. Treasurer Tim Geithner said the key to the program was to balance risk between the government and the private sector and to use private investors to price toxic assets that have become frozen in the marketplace.
The great risk we face now is that after a long period of ... excessive risk-taking, that the system will not take enough risk now,
he said.
He also said the program was designed to sidestep conditions on executive compensation that has clouded previous bailout efforts.
To purchase loans, the Federal Deposit Insurance Corp. will review assets banks want to sell and guarantee, up to a 6-to-1 debt-to-equity ratio. At the same time, the Treasury will provide the highest bidder with 50 percent of the equity required for the purchase.
The private investor would then choose when to sell the assets.
Geithner said the program had a lot of interest from the private sector.
He also said the Treasury had substantial resources,
which would start with a $100 billion investment from the Troubled Asset Relief Program and could be employed to buy $500 billion in toxic bank assets.
Source: United Press International
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