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Wall Street Slams Plan With Sell-Off
He promised the overall response to the crisis would be "forceful."
"We believe that policy has to be comprehensive," Geithner said. "We believe that the United States has to send a clear and consistent message that we will act to prevent the catastrophic failure of financial institutions that would damage the broader economy."
An initiative to help small businesses and community banks would be detailed in the next several days, Treasury officials said. They did not reveal the cost of the program.
A second program would broaden the scope of a Federal Reserve initiative aimed at unclogging the credit markets for auto, student and other consumer loans. That initiative may expand the program to as much as $1 trillion, using $100 billion from the Treasury's rescue funds, and include aid for commercial real estate mortgage markets.
The Treasury will also offer direct help to at least two dozen of the nation's largest banks that hold more than $100 billion in assets. Regulators, using uniform standards, are planning to conduct a review of these firms to determine how much they may need. Any federal aid would come with conditions giving the banks incentives to pay the money back as soon as possible. The review would determine the ultimate price tag of this program.
Treasury officials said a major aim of this "stress test" is to help regulators figure out whether these firms could withstand a downturn even worse than the current one, administration officials said.
Another goal of this test would be to shed light, for the first time, on the true extent of the toxic asset problem inside the banking system. Many financial analysts have concluded that the current values banks have assigned to these assets are much higher than they are worth. But if banks wrote them down to their actual value, many of the firms could collapse.
Based on this examination, the government could determine how much aid to provide banks and calculate what it would take in terms of low-cost financing and other incentives to get private investors to buy the assets, the source said.
Because the design of this program has yet to be formulated, officials yesterday provided only broad outlines of the plan.
Federal Reserve Chairman Ben S. Bernanke told lawmakers yesterday that the central bank would strive to keep the public better informed about efforts to combat the financial crisis.
Another initiative to help homeowners facing foreclosure is not expected for at least a week and may be announced by President Obama instead of the Treasury. Treasury officials said they would spend $50 billion on this effort, the low end of the range provided by the administration last month.
Lawmakers in both parties said they were surprised and displeased by the administration's decision to wait another week or two before unveiling a program to help struggling homeowners. With nearly 10,000 families a day falling into foreclosure, several lawmakers said the timeline Geithner suggested is too long to wait.