The banking plan: what to expect

A plan is in the works for announcement tomorrow:

Mr. Geithner, who will announce the broad outlines of the plan on Tuesday, successfully fought against more severe limits on executive pay for companies receiving government aid.

resisted those who wanted to dictate how banks would spend their rescue
money. And he prevailed over top administration aides who wanted to
replace bank executives and wipe out shareholders at institutions
receiving aid.

Because of the internal debate, some of the most contentious issues remain unresolved.

On Monday evening, new details emerged after lawmakers were briefed on the plan.

It intends to call for the creation of a joint Treasury and Federal Reserve program, at an initial cost of $250 billion to $500 billion, to
encourage investors to acquire soured mortgage-related assets from

It wants the Fed to use its balance sheet to provide the financing, and the Federal Deposit Insurance Corporation might provide guarantees to investors who participate in the program, which some people might call a “bad bank.”

second component of the plan would broadly expand, to $500 billion to
$1 trillion, an existing $200 billion program run by the Federal
Reserve to try to unfreeze the market for commercial, student, auto and
credit card loans. A third component would involve a review of the
capital levels of all banks, including projections of future losses, to
determine how much additional capital each bank should receive.

The capital injections would come out of the remaining $350 billion in the Troubled Asset Relief Program or TARP.

separate $50 billion initiative to enable millions of homeowners facing
imminent foreclosure to renegotiate the terms of their mortgages is to
be announced next week.

If that's enough, that's splendid news.  We'll see.  If that were enough, you think they would have done it by now already.


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