Banks, Toxic Assets | featured news

A Manhattan federal judge on Monday signaled he will not rubber-stamp Citigroup Inc's proposed $590 million settlement of a shareholder lawsuit accusing it of hiding tens of billions of dollars of toxic mortgage assets.

Since the financial crisis Citigroup has managed to firm up its balance sheet and fence off most of the toxic assets that brought the bank to its knees. Some shareholders want the firm to go further though, and the latest call for a breakup comes from an unlikely source.

The Obama administration launched a broad government effort this week to overhaul mortgage giants Fannie Mae and Freddie Mac and is considering splitting the companies and putting their troubled assets in a new federally backed corporation, administration officials said.

The central bank said it would expand its program of purchasing corporate debt and government bonds by $75 billion and kept its key interest rate at 0.5 percent.

Treasury Secretary Timothy Geithner said on Tuesday that most U.S. banks have enough capital to keep lending but a pile of bad debts is fostering doubts about their health and slowing a recovery.

The board that sets U.S. accounting standards voted to adopt guidelines that could reduce the losses banks have been forced to report as the values of their securities have crumbled.

Investors respond positively to plan to remove up to $1 trillion in bad assets from banks' books.

The U.S. Treasury Department is likely to unveil as soon as next week a three-part plan to relieve the U.S. financial system of the toxic assets that have been clogging up the banks' balance sheets, a source familiar with the plan said on Saturday.