Fed gov't to scoop up toxic assets

March 22, 2009 at 8:58 PM   |   Comments

WASHINGTON, March 22 (UPI) -- The federal government is about to take up to $1 trillion in bad loans and other toxic assets off the hands of U.S. banks, The Washington Post reported Sunday.

Unnamed sources told the Post the Treasury Department will announce Monday it will isolate the financial strength-sapping loans and assets in a Public Investment Corp. Under the plan, the sources said, the new entity will combine its resources with the Federal Deposit Insurance Corp., the Federal Reserve and private investors to buy the highly risky loans and assets.

While details were still being finalized, the corporation is to be funded with $75 billion to $100 billion from the $700 billion financial rescue package, the Post said.

A Treasury official said the administration is intent on stabilizing the nation's financial institutions.

"Our singular focus is on increasing lending to support economic recovery. Everything we do to stabilize the financial system is done with that goal in mind," added Stephanie Cutter, a Treasury adviser to Secretary Timothy Geithner. "Ridding bank balance sheets of problem assets is the next step in that process, but it alone won't solve the credit problem."

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