The Treasury Plan to deal with toxic assets in the banking sector is fundamentally flawed. It deals with the issue in a cosmetic way when deeper structural changes are required. The financial system is essential to credit creation and growth and we need to restore out system ASAP. But the Treasury has confused the financial system with the financial intermediaries and seems to be determined to bailout the players rather than the system, continuing in the tracks of Hank Paulson.
The fundamental flaw of the Treasury Plan is that it deals with the bank’s assets rather than its liabilities. If you’ll follow me over the fold, I’ll try to show why dealing with the assets side is complicated,expensive, inefficient and risky.