bailout package

Bank bailout: What's in the plan

Treasury Secretary Tim Geithner unveiled Tuesday the eagerly-awaited details of the TARP overhaul. Here's what you need to know.

EMAIL  |   PRINT  |   SHARE  |   RSS

By David Goldman, CNNMoney.com staff writer

Last Updated: February 10, 2009: 4:28 PM ET

Bank bailout overhaul

Obama's Treasury unveiled its financial sector plan with new initiatives and revisions to old programs

Financial stability trust

Prop up banks' capital position to generate lending.

Public-private investment fund

Purchase banks' 'toxic' assets to boost lending.

Consumer and business lending program

Boost private markets to lower borrowing costs on consumer and business loans.

Transparency and accountability

Monitor and make public financial institutions' use of government-provided funds.

Affordable housing / Foreclosure prevention

Stop preventable foreclosures and lower interest rates.

Small business and community bank lending

Boost small business and community bank lending and lower lending fees.

The good, the bad and the banks

More Videos

Tracking the bailout

Economy rescue: Adding up the dollars

The government is engaged in an unprecedented - and expensive - effort to rescue the economy. Here are all the elements of the bailouts.

View chart

Quick Vote

How effective do you think the Geithner plan to spur lending will be?

• It's enough to do the job
• It's a start, but more aid will be needed
• It won't work

 or View results

NEW YORK (CNNMoney.com) -- The federal government's bank bailout just got a lot more complicated.

Treasury Secretary Tim Geithner, 143 days after his predecessor unveiled the first financial sector rescue plan, detailed his plan on Tuesday to rescue the financial sector.

In a speech in Washington, Geithner said the government's previous efforts were "inadequate," and the government needed to "fundamentally reshap[e] the government's program to repair the financial system."

The Treasury Department and Federal Reserve took the bold step of committing more than $1 trillion in financing for loan purchases, and unveiled a sweeping reform to previous programs.

Financial stability trust

Aim: Prop up banks' capital position to generate a higher level of lending.

The Treasury, in a coordinated effort with other regulators, unveiled a three-part process to assess and boost bank lending.

'Stress test': The banking sector will undergo a check up to determine whether banks have adequate capital to continue lending. Financial institutions will also be tested to see if they can stay solvent if the downturn turns worse than expected.

Efforts will be made to improve banks' public disclosure of their holdings. Furthermore, banks with assets greater than $100 billion will have to undergo individual assessments.

Capital Assistance Program (CAP): Similar to the existing $250 billion Capital Purchase Program (CPP) under the Troubled Asset Relief Program, Treasury will continue to help banks shore up capital after undergoing a stress test. Like the TARP program, Treasury will take an equity position in the form of preferred shares in banks receiving CAP investments.

Geithner said the CAP is a "buffer" for banks aimed at increasing lending.

Financial Stability Trust: The investments that Treasury makes will then be placed into a separate trust, overseen by fund managers.

Public-private investment fund

Aim: Help banks cleanse their holdings of "toxic" assets to get private lending up and running again.

Cost: Treasury didn't yet say how much it will invest in the program. They hope their investment will spark $500 billion to $1 trillion in private sector purchases of the troubled assets.

The Treasury detailed a brand new program that will coordinate a public and private effort to buy up hard-to-sell assets from banks. The public funds will be combined with private capital to fund the purchases. Private sector buyers will set the price for troubled assets, which were previously hard to value.