Timothy Geithner, Treasury secretary, will announce the financial sector rescue plan on Monday along with a set of policies designed to reduce foreclosures and boost the housing market, according to FT.
The Obama administration's financial-rescue plan is shaping up to include capital injections with tougher terms than the first round and an expansion of an existing Federal Reserve lending facility that could potentially buy up toxic assets clogging the system, according to people familiar with the plans, according WSJ.
If the government does absorb the under-performing assets in the system, this would remove a major factor that is spooking markets and could set up a dramatic rally. On the other hand, you do not want to think about the long term inflationary consequences of the Fed buying up all this paper.
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