One way to treat a recovering drug addict is to force him to go through cold turkey. Another is to prescribe him a substitute for the original poison, such as metha-done. America's long-awaited effort to relieve banks of troubled assets leans towards the second approach, aiming to entice private buyers by offering the same supercharged leverage that coursed through the veins of the financial system during the credit boom. Paradoxically, at a time when the private sector is furiously cutting back on debt, the government sees the copious provision of cheap financing as the best way to loosen up the market for illiquid debt.rnThe public-private partnership announced on March 23rd marks a revival of sorts for the asset-buying component of the Troubled Asset Relief Program (tarp), a $700 billion rescue fund created last October which was quickly refashioned into a bank-recapitalisation vehicle. This time, however, the buyers will be money managers and insurers, not the government, though they will have plenty of help, through co-investment by the Treasury, cheap loans from the Federal Reserve and guarantees from the Federal Deposit Insurance Corporation (fdic). For every private dollar invested, the taxpayer will provide a matching dollar of equity and up to $12 of other financing. Investors can walk away from their debts if a deal loses money.
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