Geithner's Bailout Plan Leaves Markets with Questions and Big Losses

Contrary to President Obama's promise in Monday's prime time press conference, Treasury Secretary Geithner's new TARP plan was neither "clear" or "specific." Geithner's outline of Obama administration's plan seemed to fall short.

There were certainly a wealth of ideas, but the math seems to fall short of execution. The Troubled Asset Relief Program only has $320 billion remaining and the administration stated that they won't ask Congress for addition funding.

Geithner started his statement with the premise that economic recovery requires healthy financial institutions. This point reinforced the plan to continue capital injections to reinforce bank balance sheets. However, this strategy required $250 billion of the first $350 billion.

Will $320 billion even be enough to support the first item in the plan?

The new plan also calls for an expansion of the Treasury-Federal Reserve program to back credit card, debt, auto, student, and now commercial real estate loans. Under the Paulson plan, this program committed $20 billion--Geithner will move this committment up to $100 billion. Total support for Federal lending will be raised from $200 billion to $1 trillion.

One of the new features of the administration's new TARP is the notion of public-private investment fund to back the purchase of toxic asset purchases. However, this concept lacked any clear definition and later testimony before Congress added little clarity. Administration officials are estimating that they could attract up to $500 billion in private-sector investment.

Finally, $50 billion would be earmarked for foreclosure prevention program. Yet, once again little details were provided on how that program might work and the results it expects to yield.

A simple tally of these designated funds in the new TARP: $50 billion for foreclosure prevention, $50 billion for private-public toxic asset partnership, and $100 billion in grants to unclog credit markets; leaves only $120 billion to put financial institutions back on solid ground.

Most analyst, and obviously investors, think that the math comes up short on this plan. Sounds like we may be talking about a TARP 3.0 in a few short months.