WASHINGTON – President Barack Obama's administration will Tuesday unveil a new plan for the frozen banking sector including at least 50 billion dollars to shore up the housing market, officials said Sunday.
National Economic Council director Larry Summers said the plan to be announced by Treasury Secretary Timothy Geithner would help stabilize banks and encourage them to resume lending.
"There will be support for the credit markets more generally," he told ABC's "This Week" program.
"And absolutely critically, there will be support and pressure that assures that these needless foreclosures are avoided and that government is acting aggressively to contain the damage in the housing markets."
Geithner was initially planning to roll out his new measures, revamping the second half of a 700-billion-dollar financial bailout called the Troubled Asset Relief Program (TARP), on Monday.
But the Treasury Department said the announcement had been deferred to Tuesday as the Senate prepares to vote on a huge stimulus plan and Obama lobbies for the bill in Indiana before giving an evening news conference.
"The Senate votes on Monday, and economic officials administration-wide will be working and consulting with senators throughout the day," the department said in a statement Sunday.
The stimulus bill was not enough by itself, it said in promoting Geithner's "Financial Stability and Recovery Plan."
"We need to stabilize and repair our financial system to maintain the flow of credit that families and businesses depend on to keep our economy strong. The plan that Secretary Geithner lays out on Tuesday will achieve that goal."
Summers declined to get into details of the new TARP relief, but said a large chunk of it would go to housing.
"The president's made clear that he's very committed to (preventing) foreclosures. I expect that it will be 50 billion dollars or more that will be directed at providing support for the housing sector of our economy," he said.
The top White House adviser said also the refashioned program would assist banks dispose of bad assets while promoting new lines of credit in a climate of greater transparency.
Summers said the first half of the TARP spending had "averted what could have been a profound collapse," but said the credit markets were still not functioning and accepted criticism of the spending's opacity.
"And right now, we've got to put more money in to make that system more effective and to do it with transparency and accountability."
Geithner's plan will reportedly feature an "aggregator bank" to take some bad assets such as sour mortgages off banks' books, by offering government guarantees to private-sector investors that assume the debts.
The Wall Street Journal said the plan would provide capital to financial firms but with tougher rules this time, after complaints that the first round of TARP money was pocketed by the banks with no revival of credit.
The plan will also insure banks against extreme losses on mortgages and the expansion of a Federal Reserve program to directly prop up lending, according to the Washington Post.
Both Democratic and Republican lawmakers said they wanted to see more details but were emphatic that any new government help must entail a revival in bank lending.
Barney Frank, the Democratic chairman of the House Financial Services Committee, said the Obama administration would "probably" have to return to Congress for more bank bailout funds.
"But if they haven't been able to get the banks to lend more, restrict excessive compensation and help deal with foreclosure in a reasonable way, they're not going to get it," he warned on NBC's "Meet the Press."
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