Treasury Rejects Direct Aid to InsurersSubmitted by SIERRAHPBT on Wed, 02/11/2009 - 22:06
By Andrew Ackerman, Jack Herman and Patrick Temple-West
WASHINGTON - Treasury Department officials yesterday appeared to close the door on providing direct assistance to monoline bond insurers as part of their economic recovery programs.
Their rejection of any direct aid to the bond insurers - which had been aggressively sought by at least two troubled insurers - came during a background briefing following Treasury Secretary Timothy Geithner's outlining of a retooled bank bailout plan that calls for up to $2 trillion in assistance from the Treasury, private investors, and the Federal Reserve.
The plan, which Geithner outlined in broad strokes during a 30-minute speech, includes establishing a transparent "financial stability trust" that will conduct stress tests for financial institutions that receive funds through the $700 billion Troubled Asset Relief Program, as well as a $500 billion to $1 trillion public-private partnership to remove tainted - or "legacy" - assets from bank balance sheets.
The plan does not include direct assistance for states and localities, even after 10 Senate Banking Committee Democrats urged Geithner in a two-page letter Friday to use the Treasury's TARP "to purchase, or offer credit or guarantees for, certain state and local bonds." The Obama administration previously said it would provide some sort of federal backstop to the muni market.
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