Toxic Asset Plan to Offer Subsidies to Investors

The Treasury will unveil a plan to take up to $1 trillion in mortgage-backed securities and other troubled assets from financial institutions early next week, the Wall Street Journal reports. The plan, the cornerstone of efforts to rescue the banking system, calls for the creation of an entity to buy and hold bad loans and relies heavily on private investment.

The Treasury hopes to attract private investors by offering low-interest loans and acting as a co-investor, matching private contributions dollar for dollar. The administration hopes the plan will get the toxic assets off banks' books and let them resume normal lending. But investors may be wary of the government's seeming willingness to change the rules at will, and the risk of restrictions on executive pay.
(More toxic assets stories.)