In afternoon trading, the Dow is up 4.40% (+320.10 points), the Nasdaq 4.15% (+59.82 points), and the S&P 500 4.53% (+34.80) following the announcement of the government’s plans to remove bad assets from banks’ books as well as a report showing a surprising increase in home sales.

The Treasury Department said that the financial effort would rely on the government’s $700 billion financial rescue fund, the Federal Reserve and the Federal Deposit Insurance Corp., as well as private investors. The plan is designed to draw in private investors, including big hedge funds, to participate by offering billions of dollars in low-interest loans to finance the purchases. The government will share the risks if the assets fall further in price.

It was also reported that sales of previously occupied homes jumped unexpectedly in February by the largest amount in nearly six years as first-time buyers took advantage of foreclosures and other distressed properties. The sales figures don’t even reflect the new $8,000 tax credit designed to lure even more first-time buyers into the market. The tax credit is expected to juice up early summer sales, but how much will depend on the overall condition of the U.S. economy.