TheTreasury Department’s new bailout plan would require participation from private investors and would include government guarantees to limit losses. The details remain explained, but skepticism and fears of another crash are running high. For more information, read the following article from Money Morning:

By relying on asset-backed securities, large amounts of leverage and unregulated hedge funds as its key elements, the U.S. Treasury Department’s overhaul of the banking-system bailout plan is essentially relying on some of the same ingredients that caused the financial crisis in the first place.

This time around, someone should take the punch bowl away before the party even gets started. Otherwise, as Yogi Berra once said, it will be “Déjà vu all over again.”

The only difference this time around is that the U.S. Treasury Department is calling the plays.

Backdrop on a bailout

In a press conference Tuesday, U.S. Treasury Secretary Timothy …

By relying on asset-backed securities, large amounts of leverage and unregulated hedge funds as its key elements, the U.S. Treasury Department’s overhaul of the banking-system bailout plan is essentially relying on some of the same ingredients that caused the financial crisis in the first place. This time around, someone should take the punch bowl away before the party even gets started. Otherwise, as Yogi Berra once said, it will be “Déjàvu all over again.” The only difference this time around is that the U.S. Treasury Department is calling the plays. Backdrop on a Bailout In a press conference Tuesday, U.S. Treasury Secretary Timothy F. Geithner unveiled the long-awaited successor to the Bush administration’s Troubled Assets Relief Program (TARP).  The reaction was swift. Stocks plunged after the 11 a.m. press conference began when Secretary Geithner introduced a new rescue plan that was light on ...

To ease the ongoing credit crisis and get banks lending again, the Obama administration realizes that it first has to resuscitate the “shadow financial system” that’s dominated by hedge funds and other large-scale private investors.

Surprisingly, two key ingredients of this turnaround formula will be structured investments, such as asset-backed securities, and leverage - the combination and poorly policed use of which acted as the accelerants that helped fuel the financial inferno that’s now sweeping the globe in wildfire fashion.

But the reality is that new U.S. Treasury Secretary Timothy F. Geithner probably realizes that he has little choice.

Nevertheless, there are problems throughout this plan, says Shah Gilani, a retired hedge fund manager and credit-crisis expert who is a contributing editor to Money Morning.

“Maybe I don’t get it because I’m not on the inside of the new Treasury fire-fighting team,” Gilani said. “But it strikes me that

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div style=”text-align: justify;”span style=”font-weight: bold;”Wanted to take a chance to highlight Goldman’s thoughts on the “Bad Bank”:/spanbr /br /span style=”font-weight: bold;”Industry context/spanbr /br /The prospect of a government sponsored aggregator bank has sparked a major rally in bank stocks. Three questions need answers before we can assess the impact on equity holders:br /br /span style=”font-weight: bold;”1) At what price will assets be acquired?/span Market derived prices would destroy bank capital while buying assets at par puts losses to taxpayers. The distribution of losses between banks and taxpayers is critical in assessing the impact for common shareholders.br /br /span style=”font-weight: bold;”2) Who/what assets are eligible?/span Politically, it seems difficult to allow banks to sell assets to the government at a gain. Thus, brokers who mark to market would probably only benefit indirectly to the extent that fixed income markets rally. Asset purchases are likely to focus on whole loans given that …