WASHINGTON The Obama administration is promising an aggressive effort to combat the worst financial crisis in seven decades, unveiling a program that could mobilize well over $1 trillion in public and private support to get the frozen credit markets functioning again.
Treasury Secretary Timothy Geithner said Tuesday the new plan would bring the full force of the federal government to bear in a partnership with the private sector.
Right now critical parts of our financial system are damaged, Geithner said in unveiling the new plan. Instead of catalyzing recovery, the financial system is working against recovery and that s the dangerous dynamic we need to change.
The new plan would greatly expand an effort to unclog credit markets that provide loans to consumers and businesses. Funding for this effort would see a huge increase from $20 billion up to $100 billion, according to administration officials.
If a total of $100 billion from the bailout fund was used, it would be enough to support an additional $1 trillion in lending support through a Federal Reserve program that was announced in November but has yet to begin operations.
The administration also announced that the program would be expanded beyond consumer and small business loans to provide aid to the troubled commercial real estate sector.
The administration also announced a program to create a partnership between the government and the private sector to get private investors to buy bad assets that are currently weighing down the balance sheets of banks. Congressional aides who were briefed on this plan said that Treasury officials said it could involve between $250 billion and $500 billion in government support.