Tuesday February 10, 6:58 pm ET
Key elements in Obama administration’s overhaul of $700 billion financial rescue program
Here are the major elements in the Obama administration’s overhaul of the $700 billion financial rescue program:
–Capital injections to bolster banks will continue. This was the core of former Treasury Secretary Henry Paulson’s approach; it accounted for $250 billion of the first $350 billion of the program. Treasury Secretary Timothy Geithner pledged to continue the injections but with more stringent rules on use of the money. Banks with assets of $100 billion or more will face “stress tests” by regulators to see if they’re healthy. The administration didn’t say how much of the second $350 billion would go toward capital injections.
–An expansion of a Treasury-Federal Reserve program to try to unclog lending in such areas as credit card debt, auto loans and student loans. The program will now also back loans involving commercial real estate. The administration will provide up to $100 billion in bailout money, up from an initial $20 billion. It will support up to $1 trillion in Fed lending to bolster consumer and business loan markets. The initial Fed commitment had been for $200 billion in support.
–Creation of a public-private investment fund to back the purchase of banks’ toxic assets. Details on how this program will operate remain unclear. Officials estimated the program could use bailout money to attract up to $500 billion in purchases of toxic assets initially and $1 trillion eventually.
–Mitigation of mortgage foreclosures with use of $50 billion in bailout funds. No details were provided. Officials said the mortgage programs would be unveiled soon, possibly as early as next week.
North Coast Investment Research 