Taxpayers could also reap a reward from their investment if the value of the assets increases. The funds that will be created to buy the assets can exist up to 10 years and longer with Treasury's approval, according to the program's guidelines.
The toxic asset program is one part of the government's attack to thaw credit markets and prop up the economy, which has been in a recession since December 2007. Treasury has previously announced plans to help homeowners and small businesses, while the Federal Reserve is working to resuscitate the securitization market to facilitate lending for consumers, such as credit cards and student and auto loans.
The government is also analyzing the health of banks and promising to shore up the largest banks to make sure they can withstand an even more severe economic downturn. And Congress earlier this year passed a $787 billion stimulus package, which includes tax breaks and infrastructure spending.
Ethan Harris, co-head of U.S. economic research at Barclays, said the Fed's program and stimulus take pressure off of the latest Treasury program.
"We do have to judge these bailout plans as a whole," Harris said. "Two out of three ain't bad."
Contributing: David Jackson, Richard Wolf; Gogoi reported from New York; Krantz from Los Angeles