US to spend $500 bn to clean banks' bad assets

Treasury Secretary Timothy Geithner announced late yesterday a new $500-billion federal program to remove from bank balance sheets troubled assets that he said "are now clogging" the US financial system.

"The financial system as a whole is still working against recovery," Geithner wrote in an op-ed piece published in The Wall Street Journal outlining his plans.
 
"Many banks, still burdened by bad lending decisions, are holding back on providing credit."

The administration of President Barack Obama has developed a new "Public-Private Investment Program" that will set up funds to provide a market for the troubled loans and securities issued by banks over the past several years, he wrote.

"The new Public-Private Investment Program will initially provide financing for $500 billion with the potential to expand up to $1 trillion over time, which is a substantial share of real-estate related assets originated before the recession that are now clogging our financial system," Geithner pointed out.
 
The treasury secretary was due to make a formal announcement of the plan and provide details at press conference today.