Geithner announces TARP 2.0 plan


Treasury secretary Timothy Geithner just unveiled the Obama administration’s plan to revise the Troubled Asset Relief Program, the financial system bailout. We’re calling it “TARP 2.0.”

A few of the highlights that impact federal agencies:

  • The Treasury Department will “stress-test” banks. Presumably this is to ensure that banks receiving money through TARP 2.0 are actually solvent. There’s serious concern that many of the largest banks in America are insolvent.
  • Treasury and the Federal Reserve will create a “bad bank” to buy toxic securities with a mix of public and private capital.
  • The government will guarantee a larger percentage of Small Business Administration loans. SBA lending has plummeted in recent months because of tight credit markets and the deepening recession.

Geithner said the Obama team would unveil its plan for stabilizing the housing markets “within the next few weeks.” Presumably that will involve Treasury, the Federal Housing Finance Agency, the Housing and Urban Development Department, and others.


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