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INSTANT VIEW: U.S. unveils plan to help banks, lending

NEW YORK (Reuters) - The U.S. Treasury Department on Tuesday unveiled a revamped financial rescue plan to cleanse up to $500 billion in spoiled assets from banks’ books and support $1 trillion in new lending through an expanded Federal Reserve program.

KEY POINTS: * The renamed “Financial Stability Plan,” rolled out by Treasury Secretary Timothy Geithner at the U.S. Treasury, will also devote $50 billion in federal rescue funds to try to stem home foreclosures and soften the crushing impact of the deep housing crisis now afflicting the entire economy. * The Treasury said a public-private investment fund will be established, seeded with government money, to leverage private capital so that so-called toxic assets can be sponged out of the faltering banking system.

COMMENTS:

KEITH WIRTZ, CHIEF INVESTMENT OFFICER, FIFTH THIRD ASSET

MANAGEMENT, CINCINATTI:

“The dollar numbers are extraordinary on their own right. Last fall a lot of people used phrases like ‘the Treasury labors’... This looks like they are using the sledgehammer now.”

“This program is biased to protecting the liability of U.S. banks. So if you are a senior debt holder you should be protected. I don’t think there is any intention from the U.S. government to protect the common stockholders.”

“It has always been the case since September that the devil is in the details. Behind this there would probably be hundreds of pages with details the market is nervous about.”

PETER KENNY, MANAGING DIRECTOR, KNIGHT EQUITY MARKETS, JERSEY

CITY, NEW JERSEY:

“The politicians have more belief in this plan than the markets do and at the end of the day, the only vote that really counts is going to be the market’s vote.”

“It comes across as being really steeped in wishful thinking.

“The market’s going to take us to a place that is going to drive policy -- policy is not going to drive the market.

“There’s clearly not enough for the market to calibrate the time frame around which it can build a recovery and that’s at the core of the issue and why the market took 300 out of the Dow in short order.”

MICHAEL JAMES, SENIOR TRADER, REGIONAL INVESTMENT BANK WEDBUSH

MORGAN, LOS ANGELES:

“I don’t think there’s anything materially incremental that people had not read about in advance of the speech summary coming out today.

“Clearly the increase in TALF from $200 million to as much as a trillion is going to be a net positive increase, I think that will be a pleasant surprise.

“But for the most part, everything that Secretary Geithner is going to say was already known coming into the speech because of leaks that were out in the media over the weekend and yesterday, so the actual speech is not going to be that much of a surprise.

“The proof will be in the details which are still going to be unclear at the end of the speech today.

“There’s more information that still needs to be determined before we’re able to see if this is going to be a marked improvement over the past plan or if it’s just going to be another underwhelming plan presented by Washington.”

BUCKY HELLWIG, SENIOR VICE PRESIDENT, MORGAN ASSET MANAGEMENT,

BIRMINGHAM, ALABAMA:

“One of the linchpins investors were looking for was the elimination of the mark to market requirement. That does not appear to be there and there’s a knee-jerk reaction to that.

“What will be in the incentive to bring private investors to buy troubled assets? If there was a demand for those assets, they would be buying it already.

“This is not a clear cut plan. It is reminiscent of previous plans where there was convoluted calisthenics to try to fix this thing. That’s not what investors are looking for.”

BILL O’NEILL, MANAGING PARTNER, LOGIC ADVISORS, UPPER SADDLE

RIVER, NEW JERSEY:

“I don’t really think the precious metals are going to be affected that much, period. I just don’t see anything in here that is going to alter the potential long-term inflationary implications.

“It doesn’t have any immediate impact on base metals in my view because, over the short term, it certainly doesn’t provide any help (to the economy).

“It hasn’t alleviated the concerns that already existed. There is going to be very much of a wait-and-see attitude to it, and that’s bullish for gold.”

ROBERT LUTTS, CHIEF INVESTMENT OFFICER, CABOT MONEY MANAGEMENT,

SALEM, MASSACHUSETTS:

“I think it is still a challenge to price these (toxic) assets to take them off the books. The market is looking at how long will it take for this plan to start to have an impact.”

“Clearly the government is engaged, they are moving forward, they want to have some significant positive impact, but they are addressing some really tough times out there.”

“It’s a process of repair. It is going to take time and the actions that the government is taking should assist and help. My thought is it will take longer than anybody wants, and the reason is deleveraging is a long, tough process.”

“The questions would be: Can the patients who are sick stay healthy long enough? There is no quick fix for these companies.”

KATHY LIEN, DIRECTOR OF CURRENCY RESEARCH, GFT FOREX, NEW

YORK:

“What we are seeing in the currency market is that there’s a lot of hesitancy toward the super TARP plan. I think that investors are skeptical about the effectiveness about this investment fund. Overall, what we’ve been seeing from the comments released from the Treasury Department is that Geithner is not 100 percent confident in their own plan and that’s causing investors to be skeptical as well. The thinking is that the government is possibly gambling with public funds and that’s limiting any optimism.

“Overall, we’re still seeing risk aversion. We’re seeing that the Treasury plan has failed to reinvigorate confidence in the finance markets and that’s sending investors back into the safety of the U.S. dollar and the Japanese yen.”

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