New details and reaction: creation of joint Treasury and Federal Reserve program (initial cost $250-$500 billion) to encourage investors to acquire mortgage assets from banks. FDIC might provide guarantees (“bad bank.”) Second component would expand (up to $1 trillion) Fed program to unfreeze commercial, student, auto and credit card markets. Third component would involve review of Bank capital levels. Capital would come out of remaining TARP funds. Initiative for homeowners' mortgage renegotiation next week.
WSJ Op/Ed: How Government Created the Financial Crisis - by John Taylor, Stanford economics professor.
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