Goodbye TARP, Hello Financial Stability Plan

Goodbye TARP, Hello Financial Stability Plan - 2/10/2009

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2009 News and Press Releases

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News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

HEADLINE NEWS:

Goodbye TARP, Hello Financial Stability Plan
Staff Writer

FinancialWeek . February 10, 2009
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EXCERPT: The Treasury Department on Tuesday unveiled a revamped financial rescue plan to cleanse up to $500 billion in spoiled assets from banks’ books and support $1 trillion in new lending through an expanded Federal Reserve program. The renamed “Financial Stability Plan,” rolled out by Treasury Secretary Timothy Geithner (pictured) at the Treasury, will also devote $50 billion in federal rescue funds to try to stem home foreclosures and soften the crushing impact of the deep housing crisis now afflicting the entire economy. The Treasury said a public-private investment fund will be established, seeded with government money, to leverage private capital so that so-called toxic assets can be sponged out of the faltering banking system. The hope is that that will enable banks to resume lending. Mr. Geithner acknowledged that deep skepticism has developed over the fairness and efficiency of a $700 billion bank bailout program approved by Congress in October. He said leaders of some financial institutions that have received money had squandered the good faith that is needed to make the bank rescue effective. “The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to public distrust,” Mr. Geithner said. He pledged banks will go through “a carefully designed comprehensive stress test” in future to make sure their balance sheets are clean and they meet requirements for capital. On Monday the director of the White House National Economic Council, Lawrence Summers, said on CNN more measures to help the battered housing sector will be coming within about two weeks. In recent days, as Treasury worked to finalize details of its rescue package, attention has shifted to how to draw in private-sector investment to help clean up balance sheets littered with growing numbers of non-performing assets.

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