Expect to hear plenty about "toxic assets" in the news this week.
On Monday morning at 8:45 a.m., the Treasury Department announces its long-delayed bank rescue plan, a three-pronged approach which involves, according to Reuters:
1) Low-interest loans to private investors to buy up banks' bad assets.
2) A public-private fund, run by fund managers, to invest in troubled mortgages, "with government capital matching private capital contributions"
3) The Federal Reserve will enlarge the $1 trillion TALF (Term Asset-Backed Securities Loan Facility) to buy assets "weighing on bank balance sheets."
Collaboration with the private sector is a key element of the bank-rescue plan, according to the Wall Street Journal:
Treasury Secretary Timothy Geithner said the only way to resolve the financial crisis is to work with the private sector to remove troubled assets clogging banks' balance sheets, even at a time when Wall Street moneymakers are being vilified by the public and politicians.
In an interview with The Wall Street Journal Sunday, Mr. Geithner said the government cannot do this alone. "Our judgment is that the best way to get through this is if we can work with the markets," he said. "We don't want the government to assume all the risk. We want the private sector to work with us."
This week, the Senate may vote to tax large bonuses awarded by bailed-out companies, after last week's House vote sparked by widespread public outrage over retention payments handed out by AIG. Yet several leading Senators expressed doubts about the bill, questioning whether it could delay the recovery and might even be unconstitutional. According to AFP:
"I've got my doubts whether that's the best way to do this," Senate Budget Committee chairman Kent Conrad said on ABC's "This Week" program.
"I think there are certain constitutional questions about the imposition of a tax on a limited group of people," the Democrat said, while sharing in the public outrage against bailed-out insurer American International Group.
In the House, Geithner will testify on Tuesday in front of Rep. Barney Frank's Financial Services Committee, which is holding a hearing on the oversight of the AIG bailout.
Also that day, two other Congressional hearings examine other elements of the financial crisis: banking regulation and abusive credit card practices, according to the Washington Post:
- Senate Banking, Housing and Urban Affairs Committee holds hearing on modernizing bank supervision and regulation.
- Senate Administrative Oversight and the Courts subcommittee holds hearing on abusive credit card practices and bankruptcy.
Plenty of economic data, heavily anticipated by Wall Street, will be released this week, including sales of new and existing homes, weekly jobless claims, and final fourth-quarter gross domestic product numbers.
In addition, quarterly results from several retailers such as Best Buy, will be closely watched especially in the wake of former competitor Circuit City's recent bankruptcy.
"Best Buy is expected to post a 20% drop in earnings when the electronics retailer reports fourth-quarter results on Thursday," reports the Wall Street Journal.