The United States and Britain on Sunday signaled urgent and more forceful moves to reopen the world's clogged credit arteries and Barack Obama prepared a “strong message” for banks after he takes over the US presidency this week. Obama's senior adviser David Axelrod said there would be changes in the use of the second half of the $700 billion Troubled Asset Relief Program (TARP) meant to clean out bad assets from the financial system, saying the use of the first half was ineffective and poorly accounted for. “I think (Obama) is going to have a strong message for the bankers. We want to see credit flowing again. We don't want them to sit on any money that they get from taxpayers,” Axelrod said on Sunday on ABC's “This Week” news program. According to a source familiar with the Obama team, one of the options being considered is setting up a government owned bank to absorb hundreds of billions of dollars' worth of “toxic” mortgage-based and other hard-to-sell assets acquired from commercial banks so that banks can retain good liquidity. Backers of the “aggregator bank” idea say commercial banks relieved of bad assets would be more attractive to investors and less wary of resuming lending to companies and investors, helping avoid the risk of a long recession. Another option being considered is nationalizing several banks in order to stave off bank collapses. The US goverment is already a major stakeholder in several banks however few investors believe the banks will be entirely taken over. Instead the Obama team may use its pull to force banks to lend to one another and clamp down on large pays for top executives. In London, media reports said Britain was poised to guarantee “toxic debt” worth up to £200 billion ($298 billion) in a second bank bailout designed to boost lending. Government officials and bank chiefs spent the weekend in talks, a finance ministry spokesman said, seeking a solution to the worse credit in 70 years. Prime Minister Gordon Brown said details of the package would be announced “in the next day or two.” Axelrod, who said Obama's team would discuss TARP in the days after Tuesday's inauguration, said the aim was to get credit flowing to businesses and families. “That hasn't happened with the expenditure of the first $350 billion,” he said. Larry Summers, incoming head of the National Economic Council, said on Sunday that Obama's $825 billion bailout plan should have a quick impact but told CBS's “Face the Nation”: “There's no question, almost no question, that the economy is going to decline for some time to come.” He said he believed the US jobless total would not top 10 percent. Earlier this month, the US unemployment rate for December surged to 7.2 percent, it's highest in nearly 16 years. Investors around the world are worried about the fragility of the modest recovery in equities in early January amid rising concern over the health of major banks as the fourth-quarter earnings season gets underway. Denmark on Sunday unveiled a 100 billion crown ($17.79 billion) bank aid package. The deal would inject public credit into banks to jump-start their corporate and private lending.
