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White House
23 March 2009
The Obama administration has announced details of a $100 billion plan to entice investors to buy up bad loans from the nations troubled banks. It is hoped the plan will help ease the credit crunch that has disrupted the American economy. President Barack Obama is confident the plan will work.
President Obama says this latest initiative will help get credit flowing again.
"It is not going to happen overnight," he said. "There is still great fragility in the financial systems. But we think that we are moving in the right direction."
Many banks have been reluctant to loan money because they are unsure if they will need their cash reserves to cover the cost of billions of dollars in questionable loans, which are frequently referred to as toxic assets. Investors have been reluctant to buy up these questionable bank assets because of the high amount of risk involved.
President Obama says the new program will be a partnership between the government and private investors.
The government will use as much as $100 billion from an existing fund set up to rescue the ailing financial sector to provide guarantees and low interest loans to those willing to purchase these assets.
Analysts say by including private investors in the new initiative the government will be able to better evaluate the true value of these troubled assets and investors will have a stake in making a profit.
Mr. Obama says helping the financial sector is one aspect of an all-out effort to shore up the U.S. economy. But he says freeing up the credit market is crucial.
"We have got a lot of work to do," he said. "But I am very confident that with the team we have got assembled we are going to be able to make it happen."
News of the plan sent prices higher on international stock markets and U.S. stock prices opened higher on Wall Street.
Mr. Obama says he plans to discuss his overall economic strategy with world leaders next week at a summit in London being held under the auspices of the G-20 group of the world largest developed and emerging economies.
He says a coordinated approach is key to solving the global economic crisis.
"... and I am looking forward to traveling to the G-20 so that we ensure that the activities that we are doing here in the United States are effectively matched with comparable actions in other countries," he said.
President Obama spoke at the end of a meeting with U.S. central bank head Ben Bernanke, Treasury Secretary Timothy Geithner, and other members of his economic team.
Later, he continued his campaign to win public support for his proposed 2010 federal budget - particularly his request for billions of dollars for health care, education, and alternative energy.
He addressed a group of researchers and entrepreneurs involved in developing new energy technology.
"You are helping us to build a cleaner, brighter future and a stronger more prosperous economy and my administration and our country will support you in that difficult work," said President Obama.
He said billions of dollars from the economic stimulus bill he signed last month will go to encourage and support energy research and development. He said America has a choice: remain the world's largest importer of foreign oil, or become the largest exporter of renewable energy.
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