Geithner Sets Out Sweeping Overhaul to Bank Bailout – NYTimes.com

WASHINGTON — The White House plan to rescue the nation’s financial system, announced on Tuesday by Timothy F. Geithner, the Treasury secretary, is far bigger than anyone predicted and envisions a far greater government role in markets and banks than at any time since the 1930s.

Administration officials committed to flood the financial system with as much as $2.5 trillion — $350 billion of that coming from the bailout fund and the rest from private investors and the Federal Reserve, making use of its ability to print money.

Mindful of previous financial crises at home and abroad that became protracted because governments moved too slowly, Mr. Geithner pointedly criticized the Bush administration for not acting boldly and quickly enough.

But the initial assessment of the plan from the markets, lawmakers and economists was brutally negative, in large part because they expected more details.

Basic questions about how the various parts of the program would work, especially those involving the unsellable mortgages that banks are holding and preventing home foreclosures, were left for another day. Some Wall Street experts criticized the plan for relying too heavily on the same vague solutions proposed by the Bush administration.

The stock market, propped up for weeks on the expectation that Washington would finally deliver a comprehensive rescue plan, dipped almost as soon as Mr. Geithner began speaking in the morning. The Dow Jones Industrial Average fell 382 points, or 4.6 percent, by the time the market closed. Yields on Treasury bills jumped, indicating a flight from stocks to the safety of government bonds.

Not surprised the market fell so much today, because Geithner’s speech was definitely light on details, as is the Fact Sheet being distributed by the Treasury Department.

One of the most telling quotes from the fact sheet is “To be successful, we must address the uncertainty, troubled assets and capital constraints of our financial institutions as well as the frozen secondary markets that have been the source of around half of our lending for everything from small business loans to auto loans.”

And yet, the fact sheet does little to address the uncertainty … it is long on ideas, many of them great, but very short on strategies on how to accomplish those ideas, and until there’s a solid implementation plan in place, nothing is going to alleviate the fear that still permeate the capital markets.

So we’ll just keep trudging along trying to figure out how not to lose our shirts …

On the bright side, however, it looks like Morgan Stanley is going to attempt to pay back the TARP money they received last fall as soon as possible.

Morgan Stanley CEO Looks To Repay TARP This Year

NEW YORK (Dow Jones)–Morgan Stanley Chief Executive John Mack on Monday said the securities firm hopes to begin paying back the government this year for funds it received as part of the government’s bailout of the banking system.

Mack said top executives at the firm are now studying when it can repay the $10 billion received under the Treasury Department’s Troubled Asset Relief Program. Key to repayment is that Morgan Stanley’s capital markets businesses continue to improve after last year’s devastation.

“We’re waiting for the capital markets to open again,” he said during a special shareholders meeting. “Our intent is to pay it off as soon as it is feasible.”

That’s got to be a good thing.