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Treasury to unveil plan to buy up banks' toxic assets

WASHINGTON — After an unsuccessful first attempt, the Treasury Department is poised to announce today details of its plan to help get so-called toxic assets off of the balance sheets of the nation's largest and often most troubled financial institutions.

Treasury Secretary Timothy Geithner will outline the public-private partnership he discussed only in broad strokes Feb. 10, sending financial markets into a dive across the globe because of a lack of long-awaited detail.

Together, the government and private-sector players will team up to purchase the pools of mortgages, called mortgage-backed securities, which are the root of the nation's deep economic problems. Banks have been forced to write down the value of these assets quarter after quarter, because there are no buyers for them.

Without buyers for securities, banks have been unwilling to lend.

Under the public-private partnership, an auction process will be established for the purchase of these assets, with the help of the Federal Reserve and the Federal Deposit Insurance Corp. The Fed will provide a facility for financing purchases of securities, while the FDIC will help finance the purchase of loans off of bank balance sheets.

To date, banks have been unwilling to sell these distressed assets at fire-sale prices and investors have been unwilling to purchase them unless they are at a discount much steeper than banks have been willing to accept.

GOP leaders: Budget means bankruptcy

Congressional Republicans predicted a doomsday scenario on Sunday of crushing debt and eventual federal bankruptcy if President Barack Obama's proposed $3.6 trillion budget plan wins passage.

"The practical implications of this is bankruptcy for the United States," said Sen. Judd Gregg, R-N.H. "There's no other way around it. If we maintain the proposals which are in this budget over the 10-year period that this budget covers, this country will go bankrupt. People will not buy our debt; our dollar will become devalued."

White House Council of Economic Advisers chairwoman Christina Romer dismissed the negative assessments, saying she is "incredibly confident" that the president's policies will "do the job" for the economy.

Obama leery about 90 percent bonus tax

The president wagered significant political capital Sunday, signaling opposition to a highly popular congressional drive to slap a punitive 90 percent tax on bonuses to big earners at financial institutions already deeply in hock to taxpayers.

Obama defended his stance by saying that the tax would be unconstitutional and that he would not "govern out of anger." He declared his determination, nevertheless, to make Wall Street understand it must shed "the old way of doing business."

There was considerable political risk attached to Obama's implied rejection of the 90 percent tax measure. It raced through the House last week as lawmakers responded to a wave of anger over bonus payments to American International Group employees.

A week ago, the company paid out at least $165 million in bonuses even though taxpayers were keeping the insurance giant afloat with a $170 billion government bailout.

While questioning the legality and constitutionality of the House measure, Obama said he expected the Senate would produce a version of the bill he could sign.

Treasury to unveil plan to buy up banks' toxic assets 03/22/09 [Last modified: Sunday, March 22, 2009 10:30pm]

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