This is the VOA Special English Economics Report.
In Washington this week, Treasury Secretary Tim
Geithner announced new steps to rebuild trust in financial markets and restart
the flow of credit. The plan, separate from President Barack Obama's economic
recovery legislation, could total two trillion dollars.
But Secretary Geithner gave few details of the plan to
rescue banks. Investors quickly reacted. Stock markets fell almost five percent
after he spoke Tuesday. Financial stocks lost the most.
Some lawmakers criticized the lack of details. Others
said the plan was too big. But the secretary called for aggressive action,
saying there was more risk in taking small steps.
For banks that need more capital, the plan calls for private
investors or the government to provide it. But first, major banks will face a
"stress test," a careful examination of their health.
Another step is to create a Public-Private Investment Fund.
This will use government and private money to buy housing loans and other
troubled assets that financial companies are unable to sell.
The fund may reach one trillion dollars in financing,
but start with half that. The idea is to use private capital and private asset
managers to help set a market value for the securities. Exactly how is not clear
A third step is to increase the availability of credit for
individuals and businesses. Tim Geithner says the government is prepared with
up to one trillion dollars to rebuild the market for loan-based securities.
TIM GEITHNER: "Roughly forty percent of consumer
lending has typically been made available because people buy loans, put them
together and sell them. And because this vital source of lending has frozen up,
no financial recovery plan will be successful unless it helps restart
The new lending program will build on one announced
last November by the Federal Reserve. And it will expand to markets for small
businesses and products like student and auto loans.
In the next few weeks, the administration is expected
to announce details of a plan for the housing crisis. But the Treasury
secretary has promised fifty billion dollars to help people keep their homes. The
money is to come from the second half of the seven hundred billion in TARP funds.
TARP was the Bush administration's Troubled Asset
Relief Program. The Obama program is called the Financial Stability Plan. It
continues some of last year's measures. But TARP was criticized on supervision.
The new administration says it will hold banks responsible for how they use taxpayers'
money, and will report details on a Web site.
And that's the VOA Special English Economics Report,
written by Mario Ritter. I'm Steve Ember.