Credit assistance on its way

Written By: CNBC.com
Submitted By: Joseph Penny

Treasury Secretary Timothy Geithner told CNBC that the government's highly-anticipated plan to deal with troubled mortgage loans and assets is just the latest effort to stem the financial crisis.

"It's the next step in the series of efforts we're taking to make sure that the banking system is doing what it should do, which is to provide credit for the economy," Geithner said in a taped interview to be aired on CNBC at 2 pm ET.

The plan announced Monday calls for both private and federal funds to purchase toxic assets, using low-cost government financing, government guarantees and government equity as incentives.

Under a typical transaction, for every $100 in soured mortgages being purchased from banks, the private sector would put up $7 and that would be matched by $7 from the government. The remaining $86 would be covered by a government loan provided in many cases by the Federal Deposit Insurance Corp.

"Right now, you have a bunch of loans people made over the last four years before the recession," Geithner said. "They're still sitting on the system, and they're making it harder for people to lend, have confidence. And we're trying to provide a mechanism to help the market take those assets off the balance sheets of banks. That'll free up capacity for lending."

Geithner declined to provide a timetable on how quickly the new program would be up and running.

"We're moving as quickly as we can," he said. "And as soon as we have the terms designed in a way we think it'll work for the taxpayer, and soon as we get the operational infrastructure in place, we're moving."

The Treasury Secretary said the government has already taken several steps to get credit flowing again.

"We've already taken a bunch of actions to help get mortgage interest rates down, to help millions of Americans refinance their homes, to take advantage of lower interest rates," he said. "We launched a very powerful small business lending program, for obvious reasons. Last week we launched this new program to get securities markets going again."

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