Administration seeks to free frozen credit markets

WASHINGTON — The Obama administration launched a new effort Monday to end a paralysis in lending, saying it will team with investors to initially sop up to half-trillion dollars of bad assets from banks that have been reluctant to make loans to consumers and companies.

In announcing the program, Treasury Secretary Timothy Geithner pleaded for patience, saying that work to rehabilitate an industry with such systemic problems must go forward despite "deep anger and outrage" over executive bonus payments.

Geithner's performance in President Barack Obama's Cabinet has come under heavy criticism from some in Congress. The secretary announced the initiative in a Treasury Department room with no cameras allowed. He was with Obama later in the morning, however, when the president spoke briefly, saying he was "very confident" the latest plan will succeed.

Obama called it "one more critical element" in a multi-pronged effort to revive the economy and said the depressed housing market is beginning to show glimmers of hope.

Geithner said the new program will seek to harness government and private resources to purchase a half-trillion dollars of bad assets off the balance sheets of banks and said he expects purchases eventually could grow to $1 trillion.

The latest rescue plan represents another test for the embattled Geithner, whose performance has come under heavy criticism from some in Congress.

Wall Street seemed to feel rejuvenated, at least at the opening. In late morning, the Dow Jones industrial average was up 221 at 7,500. Reaction to an earlier administration bank rescue program on Feb. 10 was anything but enthusiastic, with dispirited investors sending the Dow Jones plummeting by 380 points.

The administration's newest toxic-asset repellant was another in a string of banking initiatives that have included efforts to deal directly with mortgage foreclosures, boost lending to small businesses and thaw out the credit markets for many types of consumer loans.

Administration officials said the plan put forth Monday will deploy $75 billion to $100 billion from the government's existing $700 billion bailout program for the purchase of bad assets — resources that will be supported by loans from the Federal Deposit Insurance Corp. and a loan facility being operated by the Federal Reserve.