WASHINGTON – The government will work with the private sector to buy bad assets and will do more to encourage more lending, Treasury Secretary Timothy Geithner announced today.
The government will provide capital to some financial institutions, especially those it believes can lend money. But the government will conduct a "stress test" on the institution's books to measure its viability and the institution must spell out how it plans to use the money and also embark on a foreclosure mitigation program and limit executive pay.
Geithner did not call for additional congressional funds for the Troubled Asset Relief Program, which is being renamed the Financial Stability Plan.
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He did not say whether the program will expanded so credit unions-which were made eligible for the program when Congress created it last year, will have access to the funds.
The NCUA, CUNA and NAFCU have all lobbied the Treasury Department on that matter and the heads of all three organizations are seeking meetings with Geithner to discuss it.
Geithner said that the changes were needed to reform a financial system that has impeded recovery from the recession. He said these moves, coupled with economic stimulus package currently working its way through Congress, should help get the economy back on its feet. He said the public has "lost faith in the leaders of our financial institutions."
The Senate is scheduled to vote on the stimulus bill tonight and if it passes House and Senate negotiators will work out the differences between the two versions.
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