Barack Obama’s Administration will announce its latest economic rescue plan today by offering private investors vast government-backed loans to buy as much as $1 trillion of toxic assets from America’s stricken banks.

The scheme, designed to help unfreeze the flow of credit for consumers, will be an important credibility test for Treasury Secretary Tim Geithner, who has cut an increasingly forlorn and embattled figure in recent weeks.

It will also turn the spotlight once more on Wall Street financiers, repeatedly castigated for helping to create the crisis, but whose participation and expertise are now needed to make the plan work.

Doubts are already surfacing about whether investors will risk being exposed to public shame and the vicissitudes of politics after last week’s furore — fuelled by both the White House and Congress — over AIG’s payment of $165 million (£114 million) in bonuses.

Reflecting a wave of intense popular anger, the House of Representatives last week voted for a special tax of 90 per cent on bonuses for employees at the failed insurance giant, which has received $170 billion in bailout money, and other companies owing their existence to federal funds.

Vikram Pandit, the chief executive of Citigroup, is among the bankers who have warned that efforts to stabilise the financial system would be “significantly set back” by the imposition of such a retrospective and penal tax. Administration officials have privately expressed concerns that it could lead to an exodus of employees or whole companies from federally funded programmes.

White House officials, however, have sought to take some of the heat out of the row by indicating that Mr Obama is unlikely to sign such legislation and promising that he will not “govern out of frustration”.

At the start of another crucial week for the Administration, Austan Goolsbee, a senior aide, said yesterday: “We can’t let our anger over mistakes that happened last year block the fact that we’ve got to save the economy — we have to fix this problem.”

Christina Romer, the chairman of the White House council of economic advisers, said: “The President understands the distinction between placing restrictions on companies that contributed to the financial mess and those trying to help.” Companies that participated in the scheme would be “kind of doing us a favour” and would be regarded as “the good guys here”.

Ms Romer confirmed that the taxpayer would bear the bulk of the risk for hedge funds and other private companies being invited to take part in the plan to clean up banks’ books so they can start lending again. Investors would be asked to contribute only a small fraction of the equity but to bid for the banks’ toxic assets with government-financed low-interest loans and a promise that the taxpayer would share risks if the value of assets, often related to the housing market, fell further.

The Treasury plans to contribute about $100 billion from what is left of the $700 billion bailout programme for financial institutions, as well as other resources from the Federal Reserve and the Federal Deposit Insurance Corporation.

Officials have played down a report yesterday in The New York Times that Mr Geithner plans to introduce a programme of financial regulation that would increase federal oversight of executive pay at all banks. They indicated that there was no plan to cap salaries or eliminate the much-criticised Securities and Exchange Commission or to merge that agency with other financial regulators, as some experts had predicted.

The US is under pressure from countries such as France and Germany to agree much tighter regulation of hedge funds and other institutions at the G20 summit in London on April 2.

Mr Geithner will hope that he does better with today’s announcement than when he first outlined the proposals on February 10, a performance which prompted the Dow Jones industrial average to plunge by 380 points even as he was speaking.

Last week Mr Geithner was similarly unconvincing as he faced questions about what he knew of the AIG bonuses when he authorised another $30 billion bailout of the company.

Richard Shelby, the top Republican on the Senate Banking Committee, said that his confidence in Mr Geithner was “waning every day”. He added: “If he keeps going down this road, I think that he won’t last long.”

The Obama Administration’s big spending is coming under ferocious criticism from Republicans who have highlighted a report from the independent Congressional Budget Office forecasting that the US deficit could hit $1.845 trillion this year — four times the 2008 record and significantly worse than the Treasury’s own predictions.

Senator Judd Gregg, who was once lined up to be Mr Obama’s Commerce Secretary, said: “The practical implications of this is bankruptcy for the United States. There’s no other way around it. And I find it almost unconscionable that this Administration is essentially saying, ‘Well, we’re just going to blithely go along on this course of action’ after they’re getting these numbers.”

Mr Obama used an interview with 60 Minutes on CBS last night to insist that Mr Geithner had his full support. Even if the Treasury Secretary offered to resign, he said that his response would be: “Sorry buddy, you’ve still got the job.”

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