The White House plan to rescue the US financial system, announced on Tuesday by Treasury secretary Timothy F. Geithner, 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 coming from the bailout fund and the rest from private investors and the Federal
Reserve, making use of its ability to print cash.
Geithner pointedly criticised the Bush administration for not acting boldly and quickly enough. "The spectacle of huge amounts of taxpayer money being provided to the same institutions that helped cause the crisis, with limited transparency and oversight, added to the public distrust," he said, in a clear swipe at the Bush administration.
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 programme would work, especially those involving the unsellable mortgages that banks are holding and preventing home foreclosures, were left for another day.
President Obama welcomed the news that the Senate voted 61-37 to approve its $838 billion economic stimulus bill on Tuesday, but dismissed the adverse market reaction to his bank rescue plan.
"Wall Street, I think, is hoping for an easy out on this thing and there is no easy out," Obama said in an interview with ABC News. Many of the vital details of the program remain unsettled and are the subject of an intense behind-the-scenes debate.
"Essentially what you've got are a set of banks that have not been as transparent as we need to be in terms of what their books look like,” said Obama. “And we're going to have to hold out the Band-Aid a little bit and go ahead and just be clear about some of the losses that have been made because until we do that, we're not going to be able to attract private capital into the marketplace."