By Angelo Orlando Jr.
The US government has decided to commence with a plan that will help banks free up toxic debt off their balance sheets in order for these struggling banks to be able to raise private capital. The new plan calls to help banks get rid of up to $1 billion in toxic assets that are causing them lending problems. “The US Treasury said it will launch the program with $75 to $100 billion from existing financial rescue funds with the aim of thawing the frozen market for mortgage backed securities and other hard to sell assets,” said David Lawder and Glenn Somerville of Reuters. Though there is concern that the US government will carry the burden by providing more that 90 percent of the funds to purchase the assets. Other sources of financing are expected to be the Federal Deposit Insurance Corp. and also the Federal Reserve. Treasury secretary Timothy Geithner believes that the plan will help set prices for poorly performing debt left over from the US housing market bust, while involving the market to avoid the risk taxpayers will overpay. As a result of the toxic asset buyback plan stocks have jumped 6.8 percent Monday coupled with an increase in housing sales.
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