Get the monkey off my back

Now that the investment banking model is "officially dead", it is time to resolve the murder.

The Treasury's proposal of a massive bail-out for the troubled banks, getting the toxic debt off their books sent equities sky-rocketing on Friday. By now, the shrewd investors would have taken profit with the stock indices lower yesterday and today.

So what are the traps behind the TARP (troubled asset relief programme)? As The Economist points out, it could possibly be another stop-gap measure to stem the avalanche in the financial turmoil. The first liquidity programme extended in March/Apr, then the subsequent bail-out of Freddie Mac and Fannie Mae proved to be short-term stimulus. Taking over the problematic loans and complex structures may save the floundering banks but might not win the credit crisis war.

The underlying loans may prove to be an over-bearing burden on the U.S. government and, for a nation going to the presidential elections in November, the fall-out will lie on the next leader. No wonder Mr Cowboy is all-willing to endorse this plan. He could be digging a big hole for the next fellow (then again, can anyone get worse?).

In my limited but honest opinion (of course governed by bounded rationality), this plan would only serve to prop up the rich and the very rich and the disgusting rich. The banks will survive the crisis, but the normal folks whose very loans underpinned the lending problems do not get a full resolution to their problems.

I should be grateful for this will keep me more secure (like Jade Goody on the gymnastic beam) but I wonder if this is only touching the tip of the iceberg.