Washington D.c., MD (PressExposure) March 15, 2009 -- U.S. Treasury Secretary Timothy Geithner announced March 14th, that he will soon be able to provide details of a plan, which it is hoped will help banks clean up their non-performing assets that are still clogging the financial system.
"We're going to move quickly to lay out a new financing program to deal with these legacy assets. We have and expect to see a lot of support for this program among potential buyers of the assets. The Treasury already is well on its way to starting a dramatic lending program to help securities markets get flowing again. Regulators will ensure banks have a backstop of capital to make sure they can do what's necessary to restore lending".
Geithner's program apparently has three main components;
1. It will inject government capital into some of the country's biggest financial institutions.
2. A public-private partnership to handle as much as $1 trillion of banks' bad assets will be setup.
3. A credit facility with the Federal Reserve of as much as $1 trillion to promote lending to consumers and businesses will be put in place.
The Treasury's intention is to unfreeze the credit markets by providing new incentives to banks and investors, which will hopefully encourage them to resume trading in mortgage securities and other troubled assets.
U.S. regulators are presently conducting a series of assessments to ensure that banks will have enough capital to stand the losses that they will encounter when they sell their assets.
A Treasury official, speaking on condition of anonymity, told reporters yesterday that "the Treasury will roll out enough information for investors to determine their interest in the new program, along with an operational timeframe".
In related news, Geithner met yesterday with Chinese Finance Minister Xie Xuren, just days after Chinese Premier Wen Jiabao announced that he was worried about China's investment in U.S. Treasury securities and asked for assurances that China's holdings were safe.
When asked in an interview about his meeting with Xie, Geithner replied, "The tone was very good. China is playing a very strong, very stabilizing, very important role in responding to this global crisis and we're going to work closely with them".