The Obama administration's controversial plan to rid banks of bad loans is faltering and may soon be scrapped, The Wall Street Journal is reporting.

Citing senior administration and banking industry sources familiar with the matter, the paper reported problems with the reception of the Legacy Loans Program, which is being crafted by the Federal Deposit Insurance Corp.

The scheme is part of the $1 trillion Public Private Investment Program which the Obama administration announced in March to stimulate banks to sell securities and loans burdening their balance sheets to willing investors.

Potential buyers and sellers have expressed fear to the FDIC about participating. Banking executives are worried that program's rules will change in a Democratic-dominated atmosphere hostile to a mythical version of Wall Street, the WSJ reported.

Some banks that might have sold troubled loans into the program earlier in the year, moreover, have become less eager as they regained some stability.

An FDIC spokesmen was not available for comment.

The Washington Post is also reporting online today that some potential investors told the Treasury they are concerned that the legislation could require them to divulge private information about their operations.