Shares on both sides of the Atlantic soared today after US Treasury Secretary Timothy Geithner fleshed out plans to buy up to $1 trillion of toxic assets from banks.

He said Washington could not fix the financial crisis alone, and called on the private sector to help buy assets in yet another attempt to drag the US economy out of recession.

Details of the Public-Private Investment Programme sent world stock markets surging higher with the FTSE 100 index up 103.97 to 3946.82 in London and the Dow Jones Industrial Average ahead 274.7 at 7553.08 in New York.

That was vital for Geithner and President Obama after the Dow nosedived by 380 points on the day the proposals were first laid out last month with scant detail.

Geithner today said: “This approach is superior to the alternatives of either hoping for banks to gradually work these assets off their books or of the government purchasing the assets directly.

“Simply hoping for banks to work assets off over time risks prolonging a financial crisis, as in the case of the Japanese experience.

“But if the government acts alone in directly purchasing assets, taxpayers will take on all the risk of such purchases — along with the additional risk that taxpayers will overpay if government employees are setting the price for those assets.”

He plans to purge banks of troubled property-related loans and securities worth between $500 billion and $1 trillion in a bid to kick-start bank lending and revive the economy.

The Treasury will pitch in with between $75 billion and $100 billion to launch the public-private partnerships, taking money from the $700 billion financial rescue fund Congress approved in October.

It hopes to attract private investors including pension funds, hedge funds and private-equity firms, and will offer cheap loans from the Federal Deposit Insurance Corp and Federal Reserve.

Geithner said: “Over time, by providing a market for these assets that does not now exist, this programme will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of the losses on bank balance sheets.

“The ability to sell assets to this fund will make it easier for banks to raise private capital, which will accelerate their ability to replace the capital investments provided by the Treasury.”

However, there are concerns that investors may not take part in the plan because Wall Street has been so heavily targeted by US lawmakers who want to claw back bonuses.

“Investors will be very wary of committing capital at the same time as Congress is vilifying Wall Street on bonuses,” said Sean Callow of Westpac. The Obama administration hopes to encourage firms to take part by differ­entiating between those subject to huge state bailouts, such as AIG, and those who help solve the crisis. Geithner said: “We cannot solve this crisis without making it possible for investors to take risks. While this crisis was caused by banks taking too much risk, the danger now is that they will take too little.

“In working with Congress to put in place strong conditions to prevent misuse of taxpayer assistance, we need to be very careful not to discourage those investments the economy needs to recover from recession.”

Obama hit the airwaves in the US last night to defend his Treasury Secretary amid fears that Geithner is not up to the job.

The President insisted that Geithner had his full support, and said that if he offered to resign, the response from the White House would be: “Sorry buddy, you've still got the job.”