U.S. Gears Up for Major Reforms of Financial Rescue Package

The face of the U.S. government's financial rescue package will likely change on Monday when U.S. Treasury Secretary Tim Geithner is expected to make some major announcements detailing how the remaining funds from the Troubled Asset Relief Program will be used.

According to the Wall Street Journal on Friday, sources have said that U.S. President Barack Obama's financial rescue package focuses more on capital injections than buying toxic assets, and that plans to set up a 'bad bank' is less in focus.

The Obama administration has also flirted with the possibility of expanding the Fed's various facilities geared at supporting the toxic asset debt markets through the purchase of agency debt and mortgage-backed securities, said the Journal.

The package is also expected to contain a broad based plan to fight foreclosures with $50 billion to $100 billion allotted to the effort.

Meanwhile, the Financial Times ran an article suggesting that the U.S. government is looking for ways to convert its equity into common stock so it can progressively "drip-feed" additional common equity into the market.

The administration also aims to improve public opinion over the controversial financial bailout, having already announced a hard $500k salary cap for executives of firms accessing the TARP.

Another idea that has been floated was the creation of a separate entity to manage the financial package to distance the Treasury Department from the plan.

By Erik Kevin Franco and edited by Stephen Huebl
©CEP News Ltd. 2009