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The Obama administration is close to rolling out two initiatives aimed at addressing lingering problems from the financial crisis: A long-delayed effort to cleanse financial firms of their toxic assets, and a $35 billion plan to prop up state programs that help lower-income borrowers get affordable mortgages.
Announcements on both fronts could be made as early as Wednesday.
The toxic asset program is launching nearly a year after Congress approved the $700 billion financial rescue legislation that bore the name Troubled Assets Relief Program. The initiative was once envisioned as the signature program in the government's rescue of the banking system, but financial firms grew wary of the strings attached, and it was subsequently scaled back as the crisis abated.
... The Obama administration is close to rolling out two initiatives aimed at addressing lingering problems from the financial crisis:
A long-delayed effort to cleanse financial firms of their toxic assets, ...
According to The Post, the Obama administration wants to relieve banks of those toxic assets through a combination of public and private investment.
The Treasury Department has been working behind the scenes with private firms to set up investment funds to buy the toxic assets. The funds would be a combination of public and private money. The private firms would then have the opportunity to buy the assets at a very low price in hopes that they turn a profit down the road.
The Treasury Department will initially contribute $2.5 billion in matching contributions to the fund. The private firms entering the fund would then be allowed to borrow another $5 billion in the form of leverage, The Post reports.
The program could grow to as large as $40 billion, according to The Post.
That, however, may not be nearly enough to solve the problem. According to the TARP Congressional Oversight Panel, there is $657 billion worth of toxic assets circulating in the financial markets currently.