With the thought that it is possible to stabilize the US banking system without it being forced into nationalization, the US Treasury Department has finalized its plans to ease the burden of toxic real estate debt that strangles the economy in the greatest crisis that has ever happened in seven decades.
The initiative involves combining public and private funds to acquire up to $1 trillion worth of assets related to the non-liquid mortgage fiasco. Expected to realize this plan, the Obama administration is committed to the new program that also features an additional funding effort by the Treasury, Federal Reserve and guarantees provided by the bank deposits in the Federal Deposit Insurance Corporation (FDIC).
With all these facilities, the Treasury Department hopes to attract big investors to engage in competitive auctions of toxic assets that have managed to cripple the US banking system, leading the country into recession with the consequent destruction of 4.4 million jobs.
The ultimate goal is for banks to release capital and then resume the normal flow of credit to businesses and consumers, instead of being forced to maintain substantial reserves to offset the devaluation of their toxic securities.
The Obama administration wants to create substantial buying power by combining public and private money financing that maximizes the effectiveness of government funds provided, with private investors to share the risks and potential benefits, as well as the use of auctions to achieve competitive pricing appropriate to the toxic assets at stake.
Via msn News
