US Treasury to prop up housing under revamped bank bailout

Agence France-Presse

Posted at Feb 09 2009 12:18 AM | Updated as of Feb 09 2009 08:18 AM

WASHINGTON – US president Barack Obama's administration will Tuesday unveil a new plan for the frozen banking sector including at least 50 billion dollars to shore up the housing market, a top aide said Sunday.

National Economic Council director Larry Summers said the plan to be announced by Treasury Secretary Timothy Geithner would provide "support for banks so that they remain stable, are in a position to lend."

"There will be support for the credit markets more generally," he told ABC television.

"And absolutely critically, there will be support and pressure that assures that these needless foreclosures are avoided and that government is acting aggressively to contain the damage in the housing markets."

Geithner was initially reported to be planning to roll out his new measures, revamping the second half of a 700-billion-dollar financial bailout called the Troubled Asset Relief Program (TARP), on Monday.

Asked about indications that Geithner would instead make his announcement Tuesday, Summers said: "Yes, I think there's a desire to keep the focus right now on the economic recovery program, which is so very, very important."

With the Senate battling to seal an enormous stimulus plan demanded by Obama, the president was Monday to lobby for the bill in Indiana before giving a prime-time news conference in the evening.

Summers declined to get into details of the new TARP relief ahead of Geithner's announcement, but said a large chunk of it would go to housing.

"The president's made clear that he's very committed to (preventing) foreclosures. I expect that it will be 50 billion dollars or more that will be directed at providing support for the housing sector of our economy," he said.

Dwelling on fierce criticism over the first half of the TARP spending, Summers said: "What was done averted what could have been a profound collapse, but the credit markets in the country aren't working right.

"And that's an important part of the reason why the economy's not working right," he said.

"And right now, we've got to put more money in to make that system more effective and to do it with transparency and accountability."