WASHINGTON — The Obama administration is preparing a comprehensive strategy to address the escalating financial crisis, stem home foreclosures and jump-start the overall economy, signaling that the president hopes to deal with the problems systematically instead of case by case.
The plan probably will not be delivered for several weeks, Timothy Geithner, the nominee for Treasury secretary, said Wednesday.
"We're at the beginning of this process of repairing the system, not close to the end of that process," Geithner told the Senate Finance Committee. "And it is going to require much more substantial action on a very dramatic scale."
But on the banking front, it remains to be seen how much time the administration has to come up with a plan.
For the last several weeks, Obama and his aides had hoped that the financial system, though seriously weakened, would remain stable enough to allow the administration to focus on repairing the broader economy, which would help lift the prospects of financial firms along with those of ordinary Americans.
But fear of a wider banking collapse has grown in recent days, with signs that losses at major banks are deepening.
Wall Street gave the government some breathing room Wednesday as the stock market rebounded sharply from a major sell-off the day before triggered by the financial crisis.
The Dow Jones industrial average, which tumbled 332 points Tuesday, rose 279.01 points, or 3.5%, on Wednesday. Shares of bank companies on average surged 15% after plunging 20% on Tuesday.
The new administration is thought to be considering three options to cope with the worsening financial crisis.
The first option would be to continue the Bush administration's practice of injecting capital into troubled financial institutions in hopes of improving their balance sheets. This approach has been politically unpopular, with critics complaining that banks should be lending more.
The second option would be to create a government-financed "bad bank" similar to the Resolution Trust Corp. of the savings-and-loan era. It would acquire troubled mortgage-backed securities and perhaps other assets from the banking sector. The goal would be to drastically reduce uncertainty about the health of the country's banks, enabling them to resume the kind of lending needed to revive the economy.
