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The Treasury Secretary has finally spoken and the markets are disappointed!
The price action in the currency markets suggests that investors are disappointed by the lack of details from the Treasury’s new Financial Stability Plan and are skeptical about the effectiveness of getting the private sector involved. Furthermore, investors are not happy about being apart of an experiment (although I think this is the only way to go because all of the old measures have proven effective).
Geithner announced a cocktail of initiatives using “things we haven’t tried before” and warned “that we will make mistakes.” If the Treasury Secretary is not 100 percent confident in his own plan, how could investors be?
Traders have plowed right back into the US dollar on the fear that the US government is rolling the dice once again. Equities have also fallen as much as 300 points.
The Treasury’s Super TARP plan, which is now renamed as the Financial Stability Plan has 3 core components:
1. More Capital for Healthy Banks
2. New Financing for as Much as $1 trillion of Consumer and Business loans
3. Public Financing for Private Investors Willing to Buy Distressed Debt (details of private/public investment fund have not been released)