US to overhaul financial bailout

Treasury secretary to reveal plans for private sector to buy up bad bank debt.

Geithner is set to unveil the plans in hisspeech on Tuesday [GALLO/GETTY]
Geithner is set to unveil the plans in hisspeech on Tuesday [GALLO/GETTY]

The plan would also use up to $100 billion of the remaining $350 billion in programmes to combat the current wave of mortgage foreclosures.

The Bush administration was sharply criticised for distributing much of billions of dollars from the last October’s bailout with few requirements on how banks would use the money and little transparency.

The speech was originally scheduled for Monday but was delayed partly so that the Us senate could approve the US president’s current massive economic stimulus bill.

Lending concerns

The revamped plan is also expected to rely heavily on injecting more money into banks to increase lending.

However it is thought that there will be more restrictions in terms of caps on executive compensation and better monitoring to ensure banks are using the funds to improve lending.

Banks have been condemned by the administration and economists for not extending credit to consumers despite being given billions of dollars by the US government for this purpose.

Lawrence Summers, head of the National Economic Council, said on Sunday that the administration had received several proposals for how the private sector could be involved in the solution to the banking crisis and that a “bad bank” was approaches.

“With the right strategic approaches, Geithner believes that we can bring in substantial private capital, and that’s … a better root to solving this problem than government resources.”

The $700bn government bailout of financial firms was agreed last year as the firms suffered during a global financial crisis.

About $350bn of the money has been paid out so far.

Source: News Agencies


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