TIMES are tough. Just look at property investments. They are down 98 per cent, which is about as low as they can go.

TEXT/ILLUSTRATION: LARRY HAVERKAMP AND MAROO

A bounce back from recession could take up to six years. We have never had a recession that lasted more than two years.

Blame it on the US. Their big borrowing and spending got us into this mess. Now, it is up to them to pull us out.

They might just do it. Mr Timothy Geithner is President Barack Obama's new Secretary of the Treasury (Minister of Finance).

Last week, he revealed a plan to spend up to US$1 trillion ($1.5 trillion) to help banks unload their toxic assets like sub-prime US home loans. The US stock market shot up 7per cent on the news. Singapore shares ended the week almost 10 per cent higher.

It's good. But are we really out of the woods? Sorry but no. Anyone who thinks the recession is winding down should think again.

Mr Geithner says the government's plan will '... increase the lending capacity of banks'.

It works like this: Banks will be able to sell as much as US$1 trillion of bad loans to get US$1trillion of crisp, fresh notes. They can lend it out immediately.

Terrific. It looks like we have finally found a way to free up money stuck at the banks. Now, borrowers will borrow, lenders will lend and we can all sing, 'Happy days are here again'.

Mountains of money

There is just one thing. Buried in the thousands of US Federal Reserve (Central Bank) statistics is a number called 'excess reserves'.

US banks are required to hold around 10 per cent in reserve and can lend out the other 90per cent.

Once in a while, they hold a little more than needed - called excess reserves - because there are few lending opportunities.

Since 1950, excess reserves have fluctuated between US$0.1 and US$2 billion. Back in March 2008, they hit an all-time high of US$3billion.

How about now?

As of 25 Mar, a US Federal Reserve statistical release shows that banks have US$771 billion in excess reserves.

Did you catch that? Excess reserves have grown from US$3 billion to US$771 billion in one year.

It is beyond incredible. We have never seen anything like it. Banks are sitting on a mountain of money that they don't want to lend.

You can't blame them. Why should they lend to companies that are staring recession in the face and may be unable to repay their debts?

As for consumers, bankers have no idea who are about to lose their jobs.

And the collateral used for home loans continues to decline with falling home prices.

Of course, it makes banks cautious.

The US Treasury's plan will convert up to US$1 trillion of toxic assets, like sub-prime home loans, into ready cash which banks can lend immediately.

But will they? Banks are already sitting on US$771 billion in excess reserves. Give them another US$1 trillion and they won't know what to do with it. They probably won't even bother to say thank you.

Check back in 6 months

TREASURY Secretary Timothy Geithner gave another reason for exchanging toxic bank assets for cash.

He said: '...this programme will improve asset values'.

For sure it will make bankers feel better. It can get depressing staring at all those bad debts every day.

Converting up to US$1trillion of shaky loans into cash is enough to lift anyone's spirits.

What is more, the US government is picking up much of the risk, making it a great deal for buyers.

Hedge funds will buy some of the bad debts and banks will probably participate too, bidding for each other's toxic loans.

When the plan goes into full swing - in about six months - we are likely to see the US government trying to explain the impossible: How moving bad loans between banks will somehow improve all bank balance sheets.

It is sure to be entertaining.

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