The day that $3 Trillion wasn’t good enough
Simply unreal. In another blog post I outlined a common trend in these bailouts where the bill fails and then magically the market falls and lawmakers vote again and of course pass the bill. This time around it was much different as today the Senate bill passed and Wall Street tanked to the tune of nearly 400 points on the dow.
It was interesting to see the events unravel. As word got around that the Senate stimulus bill had passed by a thin margin of 61-37 (the majority complete with some republican votes) the new Treasury Secretary Tim Geithner took the press stand to announce the new TARP program.
The chart below describes exactly what the markets thought of the plan:
Investors apparently hate the plan with the market gapping more than 50 points as Geithner began speaking about the second coming of the TARP program.
The plan is simple, the Obama administration hopes to orchestrate a new TARP program with the remaining $350 Billion (and with additional Treasury and Fed funds) to force $3 Billion more into the banking system. The outline appears to include some private equity but there is little chance that they’re going to find private equity financing unless these assets go for pennies on the dollar.
$50 Billion of the old TARP funds will be used to help people in foreclosure with the remaining allocated amounts going to hedge funds, banks and other investment groups to help get the credit markets moving again.
After today’s market action we can only hope that the Treasury will offer more information into the second TARP program. This market needs all the confidence and clarification it can get.
