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| US details toxic asset programme | US details toxic asset programme |
| (about 1 hour later) | |
| The US is set to announce details of a $500bn (£343bn) plan to encourage investors to buy up toxic assets. | The US is set to announce details of a $500bn (£343bn) plan to encourage investors to buy up toxic assets. |
| The plan will offer subsidies in the form of low-interest loans to private investors to encourage them to buy troubled mortgages and other loans. | The plan will offer subsidies in the form of low-interest loans to private investors to encourage them to buy troubled mortgages and other loans. |
| Writing in the Wall Street Journal, US Treasury Secretary Timothy Geithner said the measures were needed to help the financial system recover. | Writing in the Wall Street Journal, US Treasury Secretary Timothy Geithner said the measures were needed to help the financial system recover. |
| The plan is due to be formally launched later on Monday. | The plan is due to be formally launched later on Monday. |
| The "Public-Private Investment Programme" will purchase from banks the troubled mortgages and securities that have been at the root of the credit crisis. | |
| This should mean that banks become less anxious Robert Peston, BBC business editor Read Robert's blog | |
| It will initially provide financing for $500bn of toxic assets, with the potential to expand up to $1 trillion. | It will initially provide financing for $500bn of toxic assets, with the potential to expand up to $1 trillion. |
| "Over time, by providing a market for these assets that does not now exist, this programme will help improve assets values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets," Mr Geithner said. | "Over time, by providing a market for these assets that does not now exist, this programme will help improve assets values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets," Mr Geithner said. |
| He added that the plan was needed because the US financial system as a whole was "still working against recovery" and "many banks, still burdened by bad lending decisions, are holding back on providing credit". | |
| He said that encouraging the private sector to take part would be better for the taxpayer as the risks of purchasing toxic assets would be shared. G20 LONDON SUMMIT World leaders will meet next month in London to discuss measures to tackle the downturn. See class="" href="http://news.bbc.co.uk/2/hi/in_depth/business/2009/g20/default.stm">our in-depth guide to the G20 summit.The G20 countries are Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, the US and the EU. class="" href="/1/hi/business/7921385.stm">Q&A: G20 Summit class="" href="/1/hi/business/7942872.stm">What do sherpas do? class="" href="http://newsforums.bbc.co.uk/nol/thread.jspa?forumID=6204">Your views on the summit | |
| BBC business editor Robert Peston said the aim of the plan is to remove as many bad assets as possible from banks' balance sheets. | |
| This should mean that banks become less anxious about future write-offs and become more confident that they have the capital resources to re-start lending. | |
| It is an alternative approach to that taken by the UK Treasury, which has used taxpayer's money to insure Royal Bank of Scotland and Lloyds Banking Group against future losses on some £600bn of poor loans and investments, he added. | |
| Stocks rise | |
| The markets have been eagerly awaiting the details of the US plan to tackle bank's toxic assets, which have been seen as a drag on world recovery. | The markets have been eagerly awaiting the details of the US plan to tackle bank's toxic assets, which have been seen as a drag on world recovery. |
| Stocks rose worldwide on hopes that the plan would go some way to cleaning up the world financial system. The FTSE 100 of leading UK shares was up 1.64%, or 62.95 points, at 3905.80. | |
| The price of crude oil also hit its highest in almost four months at close to $53 a barrel on optimism the plan would help the US climb out of recession. | |
| The plan was originally announced in February, shortly after Mr Geithner took up his post as Treasury Secretary but details were scant on how it would work. | |
| The Bush administration abandoned its earlier plans to buy up toxic assets in October 2008, and decided instead to use funds from the Tarp (troubled asset relief programme) programme to recapitalise the banks. | |
| The US administration has been under pressure to bring forward its plans for the bank rescue before the G20 summit takes place in London in April, and G20 finance ministers urged action by the US at their meeting in Horsham last week. | The US administration has been under pressure to bring forward its plans for the bank rescue before the G20 summit takes place in London in April, and G20 finance ministers urged action by the US at their meeting in Horsham last week. |
| Over the weekend, administration officials dismissed fears that private investors would be reluctant to participate in the rescue plan because of the fall-out over the bonuses issues. | |
| Austan Goolsbee, a member of the Council of Economic Advisors, said that such investors "would be treated totally differently than companies like AIG or Fannie Mae, where they are only in business because the government saved them". |