Geithner Unveils New Bank Rescue Plan

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WASHINGTON --Once again, the government is looking to Wall Street to help solve the financial crisis - spending as much as a trillion dollars to jump start lending.

With so much taxpayer money at stake and increasing bailout fatigue, the question is who will buy in?

Click the player to watch the report from CBN News Washington Correspondent John Jessup followed by Pat Robertson's comments on the banking plan.

Before the opening bell rang on Wall Street, Treasury Secretary Tim Geithner rolled out the details of a new plan to buy up toxic assets weighing down the nation's banks.

He pleaded for Americans to have patience, saying that work to rehabilitate an industry with such systemic problems must go forward despite "deep anger and outrage" over certain banking practices.

The treasury secretary also defended the decision to have the government carry so much of the risk.  He said the alternative would have been to do nothing and risk a more prolonged recession or have the government carry all of the risk.

Geithner also said there would be significant advantages from having private market participants bidding against each other to set prices for which the bad assets will be purchased.

"There is no doubt the government is taking risks," he told reporters. "You can't solve a financial crisis without the government taking risks."

The Goal

The goal is buy up to a trillion dollars in bad debt to increase normal lending. However, the government can't afford to do it alone. So the plan includes a public-private partnership, where banks auction toxic assets to the highest bidder.

The government will subsidize part of the cost with the backing of the Federal Reserve, the FDIC, and the $700 billion bailout fund.

But after last week's flap over bonus pay to executives at American International Group, the Obama administration is having to reassure reluctant private investors that the plan is a winning business venture.

"The thought that the government might, after the fact, change their compensation is horrifying to them," said Douglas Elliott of the Brookings Institute. "Clearly the government will have to persuade these investors that they're not going to have compensation limits."

"I think they understand that the president realizes they are in a different category and I think they are going to have confidence that they are going to be able to come into this program," Christina Romer of the White House Counsel of Economic Advisors told FOX News Sunday.

Lack of Confidence?

But a lack of confidence in the man behind the plan is making it a harder sell.

The White House is hoping for a different outcome in the market than last month, when Geithner made statements that sent the Dow down by 380 points.

On Capitol Hill, doubts are rising on both sides of the aisle.

"No, I don't approve," Rep. Charles Rangel D-NY said while appearing on FOX News Sunday. "But I don't think we have a lot of choices."

"The question is, is Geithner the man for the job?," said Sen. Richard Shelby R-Ala. "A lot of people question that. I had reservations about him all along."

Fewer People Believing in President's Economic Plans

President Obama says he stands behind Geithner.

The problem is, a fewer people seem to be standing with the president when it comes to his plans to fix the economy.

"I don't want to turn into a socialist economy," said one Florida man.

"I really hope people take this so seriously," one woman said. "The overnight change towards socialism, and that's not what I want for my baby."

Economists believe banks need to get these toxic assets off their balance sheets to resume lending, but with growing public disapproval, President Obama needs to sell his plan not only to financial firms on Wall Street, but to a wary taxpayers suffering from bailout fatigue.

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CBN News
John Jessup

John Jessup

CBN News Washington Correspondent

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