Treasury plan raises new questions

by Laura Ehrenberg-Chesler on March 23, 2009

in Credit Crisis

The Treasury plans today to use up to $100 billion from the TARP program to help purchase “legacy assets” that are weighing on bank balance sheets.  Additional funds will come from private investors, but it also appears there will be some amount of leverage used to increase the purchasing power to $500 billion.

Once again, this calls into question how the use of leverage will provide a long term solution to the problem of excessive leverage in the financial system.

The market is up 280 points as I write this post, but it may prove to be a short lived rally if there is not more color put on how the program will actually work.  Some mechanism must be put into place to give a clear indication of how these assets will be priced.

Leave a Comment

Previous post:

Next post: