Geithner Reveals Obama Bailout Plan

Feb 11th, 2009 @ 11:29 PM by Amber Nelson

The Obama administration laid out its new bailout plan Tuesday, projecting a total cost of $1.5 trillion to $2 trillion, including the second half of the original $700 billion bailout program funding.

U.S. Treasury Secretary Timothy Geithner held a press conference, giving out details of the Financial Stability Plan and defending the high price tag. “As costly as this effort may be, we know that the cost of a complete collapse of our financial system would be incalculable for families, for businesses and for our nation,” he said. “We will make mistakes. We will go through periods in which things get worse and progress is uneven or interrupted.”

Some of the specifics of the Obama bailout include plans to buy up between $500 billion and $1 trillion worth of toxic mortgage-backed securities (MBS). Geithner also mentioned that roughly $100 billion will be invested into methods of stimulating more lending for consumers and businesses.

“It is essential for every American to understand that the battle for economic recovery must be fought on two fronts,” Geithner said. “We have to both jump-start job creation and private investment, and we must get credit flowing again to businesses and families.”

Missing from the press conference were details on the executive branch’s plan to heal the housing market. The precondition from Congress for allowing Obama to use the second half of the Troubled Asset Relief Program (TARP) was that his administration sink the funds into saving homeowners from foreclosure with lower interest rates and payments and more loan modifications. According to the Secretary, that plan will be ready in several weeks.

Geithner was one of the authors of TARP, the Bush administration’s bailout plan, and while he claims that it kept the economy from “catastrophic failure,” he admits that it did not go far enough.

“We believe that the policy response has to be comprehensive and forceful. There is more risk and greater cost in gradualism than in aggressive action,” he said.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

Posted in Mortgage Rates, Mortgage Refinancing, Mortgages
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