WASHINGTON, March 23, 2009 (AFP) - The United States unveiled a 500-billion-dollar programme to rid troubled banks of their bad assets, winning immediate approval from investors on Monday as stock markets soared.
US Treasury Secretary Timothy Geithner wrote in The Wall Street Journal that the initiative would set up a market for troubled loans and securities, freeing up banks to lend again.
In another positive development, President Barack Obama also said he could see 'flickers of hope' for the recession-hit US economy and expressed cautious optimism over a quick recovery. 'Well, we're already starting to see flickers of hope out there,' Obama told CBS's '60 Minutes.'
'Now there's a potential silver lining, which may be that things are so accelerated now, the modern economy is so intertwined and wired, that things happen really fast - for ill, but things may recover faster than they have in the past,' he added.
Markets cheered the latest news from the United States, with Japan's Nikkei index closing up 3.39 percent at a nearly two-month high on the back of the banking plan.
Sydney was up 2.4 percent and Hong Kong was more than three percent higher at lunch.
'It's certainly taken me by surprise, I thought we might be up but not by 80 points,' said Burrell Stockbroking associate Peter Wright in Sydney.
Geithner was set to unveil further details of the asset-cleaning plan later on Monday as Washington steps up its fight against the worst downturn in decades.
He wrote that the programme could eventually expand to one trillion dollars, 'which is a substantial share of real-estate related assets originated before the recession that are now clogging our financial system.'
The programme will use official funds to mobilise capital from private investors, with the government and private sector sharing the profits and risks. Funds will be open to all investors, including pension funds.
'Over time, by providing a market for these assets that does not now exist, this programme will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets,' Geithner wrote.
Last week the US Treasury said it would pump one trillion dollars of credit into its financial markets, earning an initially positive response before worries over possible inflation pushed down Wall Street on Friday.
A note of warning also came from Japan on Monday, where a government survey showed business confidence among top executives was at its lowest level in five years.
The gloomy snapshot showed that companies plan to slash their investment to weather the country's worst economic crisis since World War II.
'Amid the global economic slump, the Japanese economy is worsening rapidly and is in a severe situation,' a finance ministry official said.
In South Korea, the government and ruling party agreed on an extra budget worth 28.9 trillion won (20.5 billion dollars) to pull the economy back from the brink of recession.
A spokesman for the Grand National Party said the extra spending aims to lift economic growth by 1.5-2.0 percentage points, create about 550,000 new jobs and to offer tax cuts of about 11 trillion won.
Elsewhere, Australian flag-carrier Qantas is planning to slash 100 senior executive jobs in response to the slump in global air travel, the Australian Financial Review reported, citing unnamed senior sources.
