Global Markets are up due to the US govt. new plan for toxic assets in financial system which may stabilize the banking system.

The United States on Monday offered financing for private investors to help cleanse banks of up to $1 trillion in toxic assets that are blocking lending and worsening a deep U.S. recession.

After disappointing markets last month with a bare outline of proposed public-private partnerships, the stakes are high for Treasury Secretary Timothy Geithner as he seeks to convince investors he has a viable plan to get credit flowing again.

Initially, Treasury will pitch in with $75 billion to $100 billion to launch the partnerships, taking the money from the $700 billion financial rescue fund Congress approved in October, a Barack Obama administration official said.

The government money would be put alongside private capital and then leveraged up to $500 billion, or possibly double that amount, with the help of the Federal Deposit Insurance Corp, a U.S. bank regulator, and the Federal Reserve.

Geithner, writing in Monday’s Wall Street Journal, said it was necessary to do something to clean up the banking sector and restore lending.

“Simply hoping for banks to work these assets off over time risks prolonging the crisis in a repeat of the Japanese experience,” he said, referring to a decade of economic stagnation in Japan in the 1990s.

Under the program Geithner has crafted, the government will provide the lion’s share of the funding to buy up soured assets to encourage private investors to participate.

Geithner is due to brief on the plan at 8.45 a.m. (1245 GMT) on Monday.

Many investors are concerned at the anger that has been leveled at Wall Street by lawmakers who are seeking to claw back bonuses from companies rescued with public funds.

“Investors will be very wary of committing capital at the same time as Congress is vilifying Wall Street on bonuses,” Sean Callow, currency strategist at Westpac in Sydney.

“If markets have bought the rumor then the risk is they sell the fact of the Geithner plan,” he said. Initial reaction in global markets was more upbeat.

Asian stocks rose to a two-month high on Monday and high-yielding currencies advanced on the yen. Japanese bank shares outperformed the Tokyo benchmark and Aussie dollar, whipped by market turmoil at the height of the crisis, rose more than 1 percent.