Article Written By: Maya Randall and Michael Crittenden
Posted By: Madeleine Brooks
WASHINGTON -- The Treasury Department unveiled its plan to use both private and public funds to take toxic assets off banks' balance sheets, and Wall Street cheered the news, sending the Dow Jones Industrial Average up 6.8%.
Acknowledging that the financial system continues to face "acute pressure" and is working against economic recovery, Treasury will try to address the real-estate-related assets that Secretary Timothy Geithner said is reducing banks' willingness to take risks and to lend money to consumers. The effort will be coordinated with the Federal Reserve and Federal Deposit Insurance Corp.
"This will help banks clean up their balance sheets and make it easier for them to raise private capital," Mr. Geithner said.
The plan calls for the federal government to work with private investors to try to restart the market for the troubled mortgage loans and securities, which in turn officials hope improves the financial condition of banks that have received billions in capital injections from the government already. The federal government will pair as much as $100 billion with private capital to generate $500 billion in purchasing power to buy the assets, and Mr. Geithner told reporters the plan could reach $1 trillion in size over time.
"We have to complement this program with a range of approaches to help get these securities markets back to a point where they're working again," Mr. Geithner told reporters Monday morning.Click here to read more about this article