Bailouts

Obama Preparing Second Bank Rescue

"Bad bank" could spend up to $2 trillion.

With Bush's $700 billion financial rescue failing to stabilize the industry, President Obama's much anticipated plan for a second financial bailout to pick up where it left off is beginning to take shape. Top officials are discussing a two-part rescue that would create a "bad bank" to absorb toxic assets while also guaranteeing against losses on some other holdings. The plan is similar to one originally suggested by then-Treasury Secretary Hank Paulson after the initial crisis broke and another version of the "bad bank," Resolution Trust Corp, was employed during the savings-and-loan crisis. The costs, however, may be staggering, even compared to big tickets like Bush's first bailout and Obama's proposed stimulus plan. According to the Wall Street Journal, the "bad bank" could end up taking on some $2 trillion in assets—all without any clear idea of how much, if anything, they're worth on the market.