New TARP chief: Economy on mend, but vigilance needed

By Karey Wutkowski and Glenn Somerville

WASHINGTON (Reuters) - The new overseer of the U.S. government's $700 billion bank bailout fund said on Wednesday an intently awaited program to cleanse toxic assets from banks' balance sheets should soon be ready to roll out.

Herb Allison told a Congressional Oversight Panel there has been progress in developing public-private partnerships to pair investors and the government in buying poorly performing assets from banks.

"I'm confident that very soon we'll be launching partnerships," Allison said.

In a wide-ranging exchange of questions and answers, Allison said there were signs the U.S. economy was on the mend but stressed there could be no let-up on recovery efforts.

"Our financial system and our economy remain vulnerable, with unemployment still rising, house prices falling and pressure on commercial real estate continuing to build," he said.

Allison also said that Treasury will "soon" publish guidance on how to value warrants that the government received when it injected capital into banks and that the banks are able to buy back as they regain stability and pay back the capital.

"We'll soon be publishing on our website our approach to valuing the warrants and if it comes to that, disposing the warrants," he said.

The warrants to buy shares were intended to provide a means for taxpayers to share in the profits of banks that benefited from being able to draw on taxpayer-funded help.