The big bang announcement by US Treasury planned for next week is likely to have three key economic elements: moves to clean up the banking system, moves to restore the flow of credit in securitised financial markets, and moves to reduce home foreclosures.
The exact shape of the banking sector clean-up plan has still not been finalised. But it is likely to involve elements of both a “bad-bank” solution and insurance-style guarantees on pools of problem assets that remain on bank balance sheets.
