House Speaker Nancy Pelosi released a statement Monday following Treasury Secretary Timothy Geithner's announcement of the Treasury Department's plan to purchase toxic assets.
Earlier in the day, Geithner announced that Treasury would partner with private investors to buy $500 billion in real estate loans and mortgage-backed securities from banks.
This program would grow, Geithner said, to possibly $1 trillion over time.
The plan would call for the government to provide up to $100 billion in funds for the program, and would require the government to share in profits made on investments.
Banks involved in the program would identify loans they would like to sell, and the Federal Deposit Insurance Corp. would auction them to investors.
Treasury and investors would both provide equity capital to winning investment funds, and the FDIC would guarantee debt issued to buy the loans.
The Obama Administration's new initiative for disposing of 'legacy assets' to restore the steady flow of credit to consumers and small businesses builds on strong actions to reduce home foreclosures and jumpstart our economy with the American Recovery and Reinvestment Act, Pelosi said in her statement.
Dealing with these assets is an essential step in stabilizing our financial system, promoting jobs and reviving the US economy.
Going forward, she added, we must end the era of irresponsibility with legislation to reform regulation of large, inter-connected financial institutions to restore common sense to their business practices and a strong dose of stability to the financial system.
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