New Bank Bailout Expected To Include Private-Sector-Backed "Aggregator" Bank

The latest part of the new bail bailout, which has been delayed until Tuesday, is expected to include a partnership with the private sector to purchase banks' troubled assets through the creation of a so-called "aggregator" or "bad" bank.

The Treasury will use part of the $350 billion left from the TARP to fund the aggregator bank, but much of the capital will come from the private sector.

It is still uncertain how the government will entice investors to participate in the aggregator bank, given they can buy assets in the open market for pennies on the dollar. The government will likely offer incentives, including providing guarantees to limit the risks associated with buying the assets.

Besides the private-sector-backed aggregator bank plan, the new bank bailout plan is also expected to include fresh capital injections, help for homeowners, a significant expansion of the TALF and government guarantees on assets.

Bank stocks are mixed this AM: Bank of America (NYSE: BAC), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Company (NYSE: WFC), Citigroup, Inc. (NYSE: C), US Bancorp (NYSE: USB).

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