Tue Feb 10, 2009 10:42am EST
WASHINGTON (Reuters) - The following is an overview of the financial stability plan U.S. Treasury Secretary Timothy Geithner will outline in a speech at 11 a.m. EST.
A copy of the overview was obtained by Reuters.
Today, the Obama Administration unveiled a comprehensive Financial Stability Plan that will bring the full force of the federal government together in partnership with the private sector to stabilize our financial system and open up the flow of credit that families and businesses depend on to keep our economy strong.
Without a powerful Economic Recovery Act, too many Americans will lose their jobs and too many businesses will fail. But, unless we restore the flow of credit, and repair our financial system, the recession will be deeper and longer, causing even more damage to families and businesses across the country.
Building on President Obama's commitment to "do whatever it takes" to stabilize our financial system and protect consumers, (U.S. Treasury) Secretary Geithner made it clear that the response to the financial crisis must be comprehensive and forceful, and that action has to be sustained until financial recovery is firmly established.
Along with new programs to prevent home foreclosures, restore confidence in the markets and create public-private partnerships to boost lending, the Financial Stability plan will institute a new era of accountability, transparency and conditions on financial institutions receiving funds.
The Plan will do four things:
1. To stabilize the system and restore confidence in our markets, for the first time ever federal bank regulators will come together to institute uniform standards to help clean up and strengthen banks, and conduct "stress tests" to ensure the nation's largest banks can withstand a worsening economy. Those banks that need it will be given a capital buffer to ensure they can keep lending to families and businesses until they can attract additional private capital and weather economic downturns.
2. To revitalize lending and increase much-needed credit flowing to consumers and businesses, Treasury and the Fed are creating a new consumer business lending initiative to leverage up to $1 trillion to kick-start the secondary lending markets, which will bring down borrowing costs for responsible borrowers and help get credit flowing again.
3. To get financial markets working again, we will create a new Public-Private Investment Fund which provide government capital and financing to leverage private capital to buy up the "toxic assets" that are dragging down lending. This would allow financial institutions to cleanse their balance sheets while letting private sector buyers determine the price for previously illiquid assets.
4. To keep people in their homes and curb the housing crisis, Treasury will work with the Federal Reserve to commit $50 billion to reduce monthly payments and establish loan modification guidelines for government and private programs. The Financial Stability plan will also require all firms receiving federal funds participate in foreclosure mitigation plans to stem the housing crisis.
Access to government resources is a privilege not a right and comes with tough new conditions and responsibilities. We need to earn the public's trust that those who were not responsible for this crisis aren't bearing a bigger burden than those who were.
To increase transparency and accountability to protect taxpayers, Treasury will:
-- Launch a new Website, FinancialStability.gov, to detail where federal funds are going and whether they are succeeding in stabilizing the financial system and promoting new lending, including posting all contracts on the Internet.
-- Require banks to show how government assistance will expand lending and how they intend to use taxpayer dollars.
-- Restrict dividends, stock repurchases and acquisitions to provide assurance that all taxpayer money will go to promote lending until that money is paid back.
-- Limit executive compensation, restrict golden parachutes and require disclosure of luxury spending provisions so the public can hold them accountable.
(Editing by James Dalgleish) |
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