The Plan to Fix the Financial System
September 25, 2008
Morgan Stanley's Economics & Strategy team outlined the US Treasury's new plan to fix the financial system and the market implications for investors, for the financial services industry and for monetary policy, in a recently released report called "The Plan to Fix the Financial System: What Will Pass, Will It Work, and How Will Markets React?"
The report outlines the key elements of the plan, which include: - Moving troubled assets from lenders’ balance sheets to the Treasury's
- Providing liquidity and an insurance backstop to money-market funds
- Temporarily banning the selling of financial shares short
- Broadening eligible collateral for and supply of liquidity
Many details remain unclear, however, the team notes. Among them: Which assets and institutions will be eligible, the nature of the process used to price and buy the assets, how losses and future gains are shared, the scope and nature of Congressional oversight and the cost to the taxpayer. Members of the team contributing to the report include: - Richard Berner, Co-Head of Global Economics
- Jim Caron, Head of Global Interest Rate Strategy
- Sophia Drossos, Head of Foreign Exchange Strategy
- David Greenlaw, Chief US Fixed Income Economist
- Gregory Peters, Head of Fixed Income Strategy & Economics
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