Treasury Plans More Expansive Approach to Financial Rescue

From Wsj.com:

Treasury Secretary Timothy Geithner's revamp of the $700 billion financial-sector bailout is likely to rely on a broad range of tools, from injecting additional capital into banks and helping homeowners avoid foreclosure to expanding the roles of the Federal Reserve, Fannie Mae, Freddie Mac and the Federal Deposit Insurance Corp., according to people familiar with the matter.

The final plan isn't likely to include the creation of a government bank to directly buy bad assets from banks, as was once envisioned. That plan foundered because of its cost and complexity. Instead, the goal will likely be to expand a Fed program to reboot credit markets, among other ways to relieve banks of their bad bets.

For homeowners, the administration is expected to announce a plan that could include the creation of national standards for loan modifications to be adopted by mortgage giants Fannie Mae and Freddie Mac. The plan could include a mechanism to determine the value of homes facing foreclosure -- something that has proven hard to do -- which could speed negotiations with troubled borrowers.

A related move would see the government using taxpayer dollars to give mortgage companies an incentive to modify loans. One idea would help reduce interest rates by having the government match mortgage companies' interest-rate reductions to a certain amount. Mr. Geithner is also expected to express support for legislation that would allow judges to modify the terms of mortgages in bankruptcy court.