"The crucial thing is it's being designed precisely so that it is going to be safe. We very much have the taxpayers' interest in mind, but we also have the interest of the whole economy on the mind."
Private investors will also be encouraged to help get billions of dollars of the toxic assets - purchases made by the banks that exposed them to large losses - off their balance sheets.
The plan could be formally announced by Timothy Geithner, the treasury secretary, as early as Monday.
Geithner is under fire over bonuses paid by insurer American International Group (AIG) after being handed billions of dollars of taxpayers' money to prevent the company's collapse.
"The sooner they get these assets off banks' balance sheets, the quicker the system will find its footing and get the economy moving again"
Richard Shelby, the senior Republican on the senate's banking committee, said his confidence in Geithner was "waning every day".
"If he keeps going down this road, I think that he won't last long. I think he's probably on shaky grounds now, at least with the congress and a lot of the American people," he told Fox News Sunday
Obama has defended Geithner, saying in an interview with CBS television that he would not accept the treasury secretary's resignation, even if it was tendered.
Officials, who spoke on condition of anonymity because the final details have not been announced, said Geithner's toxic assets plan has three major parts.
A new government body, backed by the US banking regulator, the Federal Deposit Insurance Corporation (FDIC), would need to be set up to buy and hold troubled assets that banks want to sell.
An expanded programme to make it easier for consumers to get small loans is also part of the plan, as are big subsidies for private investment firms that buy mortgage-backed securities, with the government matching those private funds dollar-for-dollar.
Removing toxic assets is considered vital to getting banks to resume normal lending.
"The key is going to be if the government buys these assets quickly," Mark Zandi, chief economist at Moody's Economy.com, said.
"The sooner they get these assets off banks' balance sheets, the quicker the system will find its footing and get the economy moving again."
But other economists have expressed scepticism over Geithner's plan.
Paul Krugman, a recent winner of the Nobel prize for economics, said the plan failed to address fundamental flaws in the US financial system.
"The Obama administration is now completely wedded to the idea that there's nothing fundamentally wrong with the financial system - that what we’re facing is the equivalent of a run on an essentially sound bank," he wrote in a column for The New York Times on Saturday.
"And I fear that when the plan fails, as it almost surely will, the administration will have shot its bolt: it won't be able to come back to congress for a plan that might actually work."