Is bad market news good TARP news?

The DOW dropped over 4 percent today, apparently in response to Geithner's incomprehensible announcement about the new TARP plan. Most news stories seemed to take the drop as a sign that it's a bad plan.

I think not. Notice banks did much worse than average: BofA lost nearly 20%, Citi about 15%, American Expressn and JP Morgan about 10%. That signals the Treasury doesn't want taxpayer dollars going to bank equity. We want the money lent out. We want taxpayers to get a good deal on assets they buy. That means shareholds should lose. So the drop could be good news for the new TARP plan.

There seems to be a lot of uncertainty about the details of this plan but I don't think the market crash is bad news at all. It seems, at least, that they are trying to do this without giving a windfall to equity holders in the banks. At the same time, they're going to try to do it without nationalizing them. It will be hard to do both. We shall see...

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