Bank Rescue Would Entail Triage for Troubled Assets - Increase Taxpayer Money

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http://www.washingtonpost.com/wp-dyn/content/article/2009/02/03/AR2009020303782_pf.html

"By Binyamin Appelbaum and David Cho
Washington Post Staff Writers
Wednesday, February 4, 2009; D01

"The Obama administration's emerging rescue plan for the banking system would amount to financial triage, with the Treasury Department playing the delicate role of deciding which of the trillions of dollars in troubled assets plaguing the economy to buy, guarantee or leave in the hands of banks, sources said.

The high-stakes approach would dramatically increase the investment of taxpayer money in the financial industry, and the potential losses. The plan, which Treasury Secretary Timothy F. Geithner is set to announce Monday, is being crafted under tremendous political pressure from people who say the government is risking too much as well as from those who say it is not doing enough to end the crisis....

Instead of taking a single approach, the Obama administration plans to divide assets and other loans into three categories, each with its own solution, according to sources familiar with the discussions, speaking on condition of anonymity because the details are not finalized. The government would buy and hold on to those assets whose falling prices are putting banks under the most pressure. Officials want to limit these purchases because of the vast expense.

The centerpiece of the plan would be a guarantee to limit losses on a second group of troubled assets that can be kept by the banks because they have more stable prices.

And it would allow banks to retain and profit from their healthiest assets.

Beyond these initiatives, the government also is likely to inject more capital into troubled institutions..."