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| US details toxic asset programme | US details toxic asset programme |
| (19 minutes later) | |
| The US has announced details of a plan to buy up to $1 trillion (£686bn) worth of toxic assets to help repair banks' balance sheets. | The US has announced details of a plan to buy up to $1 trillion (£686bn) worth of toxic assets to help repair banks' balance sheets. |
| The "Public-Private Investment Programme" will purchase the troubled mortgages and securities that have been at the root of the credit crisis. | The "Public-Private Investment Programme" will purchase the troubled mortgages and securities that have been at the root of the credit crisis. |
| The Treasury has committed $75bn to $100bn to the programme and said the private sector would also contribute. | The Treasury has committed $75bn to $100bn to the programme and said the private sector would also contribute. |
| The Treasury said the plan would help the financial system recover. | The Treasury said the plan would help the financial system recover. |
| "This approach is superior to the alternatives of either hoping for banks to gradually work these assets off their books or of the government purchasing the assets directly," the Treasury said. | |
| This should mean that banks become less anxious Robert Peston, BBC business editor Read Robert's blog | This should mean that banks become less anxious Robert Peston, BBC business editor Read Robert's blog |
| "Simply hoping for banks to work legacy assets off over time risks prolonging the financial crisis," it added. | |
| The $75bn - $100bn will come from the Treasury's Troubled Asset Relief Program, which has already been approved by Congress. | |
| It said that money will initially provide the "purchasing power" 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 wrote in the Wall Street Journal before the programme was officially announced. | |
| 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". TOXIC DEBTS/ASSETS Loans that are very unlikely to be recovered from borrowersToxic debt describes a whole package of loans where it is now unlikely that it will be repaidLoans are regarded as a bank's assets Financial jargon explainedTimeline: US government bail-outsQ&A: How the latest plan will work | |
| 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. | |
| 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. | 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. | 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 | 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 1.1%, or 42.31 points, at 3885.16. | 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 1.1%, or 42.31 points, at 3885.16. |
| 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 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 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 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. | 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". | 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". |