What I did take away from the whole show was that the Fed is going to play for time. It isn’t going to nationalize or put a big bank in receivership but it will step in with capital as needed to keep them afloat. Let time and all the other initiatives work to sort things out.
That’s what the fiscal stimulus bill is pretty much counting on and I expect that when and if Geithner comes out with some plan that it’s not going to be much more revolutionary. I suspect the administration and the Fed may have looked at all of their options and concluded from a business point of view that there is as much risk as reward to acting too boldly. I also suspect that from a political standpoint they don’t want to deviate too far from the norm.
All in all, if they truly are adopting a modest approach to solving the problem that might be as good a reason as any for the market to rally. It knows as well as the rest of us that government action on our behalf rarely benefits us.