White House Economic Advisor Lawrence Summers said Monday that there is substantial private investor interest in the government's public and private partnership plan to take bad assets off banks' balance sheets.

Stocks rallied following the announcement Monday morning, and Summers reacted by saying, we're gratified by the market reaction.

The plan involves the U.S. government spending up to $1 trillion to support the toxic debt market, in partnership with private investors. The Federal Deposit Insurance Corporation will guarantee private-sector loans for these purchases.

Five different private public funds will bid on toxic assets and sell them to the broader public.

Summers said U.S. Treasury Secretary Timothy Geithner's plan is aimed at thawing frozen credit markets.

As markets stabilize, the taxpayer's role in financial markets will diminish, Summers said, adding that investors participating in the bad debt plan will not be subject to salary caps.

The comments come after public outrage last week to multimillion-dollar bonuses awarded to employees at AIG, the insurance giant which received $180 billion in U.S. taxpayer money.

By Megan Ainscow, mainscow@economicnews.ca, edited by Ernest Hoffman, ehoffman@economicnews.ca