Government Mulls Facility to Buy Bad Debt

The federal government is mulling the creation of a facility to take on bad debt from reeling financial institutions as a way to stem the deepening financial crisis, CNBC reported Thursday.

Treasury Secretary Henry Paulson is floating the idea of a government entity, similar to the Resolution Trust Corp. of the late 1980s that solved the savings and loan crisis, to take over bad debts from a number of financial institutions.

After the report aired, the overall stock market rocketed higher, and the financials were some of the biggest beneficiaries.