US unveils $2trn banking plan

11 February 2009

US Treasury secretary Tim Geithner has outlined a plan to support the country's banking system that could see up to $2 trillion in public and private funding pumped into the sector.

Warning that the country faces the "most severe financial crisis since the Great Depression", Mr Geithner laid out proposals to set up a $500 billion public-private investment fund to buy up the toxic debt currently weighing down banks' balance sheets.

The fund, which will get its seed money from the government, could eventually be expanded in size to $1 trillion, the Treasury secretary said.

Elsewhere, a key Federal Reserve program designed to support lending to businesses and individuals will see its funding increased from $200 billion to $1 trillion.

Another $50 billion will be used to try and ease conditions in the housing market.

Wall Street reacted badly to the plan, with benchmark stock indexes falling sharply. Many investors were worried that the plan lacked details, while others were concerned that it is just not big enough.

Meanwhile, the US Senate has approved an $838 billion version of the Obama administration's economic stimulus plan.

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