Highlights of $700-billion plan to rescue financial system

What's the plan?

As much as $700-billion in taxpayers' money would be used to purchase banks' worst mortgage-related investments, with the ultimate goal of reviving lending on Wall Street and Main Street.

What to watch

If the plan works, interest rates on short-term Treasury securities backed by the full faith and credit of the U.S. government should rise, signaling banks are more willing to take on riskier types of debt — including new mortgages and student loans.

No magic wand

Rising unemployment and falling real estate values are not expected to disappear overnight, and a recession is still possible. Economists say it could be late 2009 before home prices begin to recover.

The details

• Provides up to $700-billion, starting with an initial $250-billion, to allow the Treasury Department to purchase troubled assets, mainly in the area of mortgages.

• Gives the Treasury Department, working with experts chosen by the government, the authority to fashion the asset purchase program.

• Restrictions will be imposed on the pay and benefits received by executives whose companies are selling some of their bad assets through the government's purchase program.

• The Treasury would be required to provide details of its purchases within two days of the transactions, and various oversight boards would be created to monitor the operation of the program.

• Taxpayers get ownership stakes in companies whose bad assets are purchased. After five years, if the government is facing a loss in the program, the president would be required to submit a plan recommending how the money can be recouped from financial firms.

• Establishes a program whereby banks could buy government insurance to cover the principal and interest on certain troubled assets, rather than selling them outright.

Associated Press

Highlights of $700-billion plan to rescue financial system 09/28/08 [Last modified: Wednesday, November 3, 2010 2:05pm]

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