Monday, March 23, 2009

White House takes on banking crisis

Posted by: Sarah Reilly

Steven R. Hurst, Associated Press Writer

WASHINGTON (AP) -- The Obama administration on Monday launched its much-awaited assault on the worst U.S. banking crisis in 70 years, preparing an infusion of billions of federal dollars to thaw the nation's frozen credit markets and ease the economy out of recession.

The announcement of the plan sent world stock markets soaring Monday. On Wall Street, the Dow Jones industrial average rose by nearly 5.5 percent.

Treasury Secretary Timothy Geithner's banking plan will use low-interest loans and between $75 billion to $100 billion of what's left of the government's $700 billion bailout fund to entice private sector investors to initially buy about $500 billion in toxic assets -- taking them off the books of the nation's banks.

The administration also said the initial effort could grow to $1 trillion, as the program proves successful in attacking the problem that has stifled bank lending to consumers and business, compounding the worsening global downturn.

President Barack Obama told reporters Monday his economic team was "very confident" the rescue plan would work and that taxpayers would share both in the upside of the plan as well as the burden of any losses.

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