The Obama administration will announce new policies to increase the flow of credit and strengthen the nation’s financial systems this week.
In his weekly YouTube address, President Barack Obama said Treasury Secretary Timothy Geithner will announce a series of initiatives to improve the credit markets. These measures, he said, will lower mortgage costs and give job-creating loans to small businesses.
Acknowledging the nation’s ever-worsening financial crisis, Obama said, “The good news is that we are moving forward with a sense of urgency equal to the challenge.”
Obama said the the plans will include increased measures of transparency and accountability, days after it was revealed some financial institutions that received government bailout money paid out billions in executive bonuses.
In an interview Sunday that aired on NBC’s ““Today”“:http://www.msnbc.msn.com/id/28975726

Obama also told “Today” financial institutions will have to write down their toxic debt, and some banks will fail.
“It is likely that the banks have not fully acknowledged all the losses that they’re gonna experience,” Obama said. “They’re gonna have to write down those losses. And some banks won’t make it. Other banks – are gonna make sure – that we strengthen.”
One option under consideration is a government-run “bad bank” that would buy bad debt from banks to help clear financial institutions’ balance sheets.
When asked if the government would create such an institution, Obama shied away from giving a direct answer.
“I don’t wanna preempt an announcement next week, and there’s a lot of technical aspects to it. And if I say that we’re doing one thing, then the markets might interpret it differently from what it ends up being,” Obama said. “But the basic principle that we’re gonna have to see some of this debt written down, that the government is gonna have to support some banks, that others that are not not viable, essentially that we’re gonna have to do something with those assets.”
The bad bank could be established with as much as $200 billion in Troubled Asset Relief Program (TARP) funds, but according to a Wall Street Journal report, could cost as much as $2 trillion, funded by selling government-backed debt or borrowing from the Federal Reserve.
Another option on the table is using TARP funds to purchase common stock in banks. Previous purchases have been for preferred stock, and officials are trying to find a way that would help banks recover without nationalizing them. With common stock prices at record lows, any significant financial investment would essentially give the government control.