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Geithner to detail plan to help banks clean up

UNITED States Treasury Secretary Timothy Geithner has said he will soon provide details of his plan to help banks clean up the non-performing assets that are clogging the financial system.

"We're going to move quickly to lay out a new financing program to deal with these legacy assets," Geithner said in an interview with Bloomberg Television on Saturday during a meeting of Group of 20 finance ministers in Horsham in England. "We have and expect to see a lot of support for this program" among potential buyers of the assets, he said.


Geithner disappointed investors and was criticized by US lawmakers, including Senator Kent Conrad of North Dakota, chairman of the budget committee, for outlining plans to address toxic assets without an explanation of how they will work. The Standard & Poor's 500 Stock Index slumped 4.9 percent on February 10, the day Geithner announced the plan.

Geithner's program has three main elements: Injecting fresh government capital into some of the country's biggest financial institutions; establishing a public-private partnership to handle as much as US$1 trillion of banks' bad assets; and starting a credit facility with the Federal Reserve of as much as US$1 trillion to promote lending to consumers and businesses.

The Treasury hopes to unfreeze credit markets by providing new incentives to banks and investors to resume trading in mortgage securities and other troubled assets. US regulators are conducting a new series of examinations to make sure banks have enough capital to accept losses when selling these assets, while also planning to provide government financing to the investors who might buy them.


More information about the public-private investment plan will be made available this week, a Treasury official told reporters on Saturday, speaking on condition of anonymity. The Treasury will roll out enough information for investors to gauge their interest in the new program, along with an operational time frame, the official said.

Geithner said the Treasury already is well on its way to starting a "dramatic lending program to help securities markets get flowing again." He said regulators will ensure banks have a "backstop of capital" to make sure they can "do what's necessary" to restore lending.

The Treasury also is looking to a new program, launched in partnership with the Federal Reserve, to encourage banks to make new loans. The Term Asset-Backed Securities Loan Facility is intended to revive the market for securities backed by consumer loans, yet it may start with just a handful of deals, according to participants in the preparations.

Last week, the Fed delayed by two days until the coming Thursday the deadline for submissions of proposed packages of debt that investors can buy with Fed financing. Brokers and investors have had difficulty agreeing over contract terms for the TALF, the people said.

The Treasury isn't worried if the TALF gets off to a slow start, the Treasury official told reporters. The program is meant to be a longer-term effort to spur new lending, so a slow initial take-up shouldn't be surprising, he said.


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