Treasury to roll out toxic asset plan

By: Mike Allen
Politico
March 20, 2009

Treasury Secretary Tim Geithner will announce a plan early next week to relieve failing banks of their toxic assets by attracting back private investors rather than have the government buy up all the risk, according to officials familiar with the plan.

Private investors, including hedge funds, will be able to bid on the assets using a pool of capital from the investors and the government, with taxpayers sharing in profits or losses.

The plan uses up to $100 billion of taxpayer funds to leverage up to $1 trillion in private capital, the officials said.

“We’re creating a market, not bailing out banks,” said an official briefed on the plan. “Because we’re creating a market, we’re letting the private sector set the price, which will likely be below purchase price but above what government would get for them. “

Here is how it would work:

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