The US Treasury department has detailed its plans to help rid the country’s banks of billions in so-called toxic assets.
That is things like mortgages on properties that are now worth less than the amount lent. Treasury Secretary Timothy Geithner is confident that private sector money will be attracted to the scheme adding to the taxpayers’ billion that are being committed. Once their toxic assets disposed of the hope is the banks will resume lending. Geithner said that creating public-private partnership with generous government financing would share the risk and help avert a longer and deeper recession. He added Washington could not bear sole responsibility for getting credit markets working properly again. The private sector seems to be reacting positively as Pimco, the world’s largest government bond buying fund said it would participate. And the Chinese central bank has confirmed it will go on buying US government debt. The vice-governor Hu Xiaolian said: “Concerning our investment in US bonds, we feel that this is an important part of our foreign reserve management and we will continue with this.” But she did confirm that Beijing is concerned about the safety and profitability of US bonds. Washington’s actions will weaken the dollar which would erode the value of those assets.