The US Treasury on Tuesday announced a revamp of its financial rescue plan, pledging to clean up to a trillion dollars of distressed assets from banks’ balance sheets and inject fresh capital into troubled financial institutions.
The “financial stability plan”, unveiled by Tim Geithner, the Treasury secretary, will create a new “bad bank” style partnership called the Public-Private Investment Fund, which will bring in private money with the initial aim of buying $500bn-worth of distressed assets from banks. The programme could be extended to $1,000bn if necessary.
The proposal involves no new public money for the moment and will aim to use the remaining $350bn in the Troubled Asset Relief Programme (Tarp) authorised in October, together with an extension of credit guarantees from the Federal Reserve to finance up to $1,000bn in new consumer and business loans.
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