Wednesday, April 8, 2009

FT analysis of Geithner's public private investment program

The scheme should help clarify the degree to which current depressed prices of traded securities reflects liquidity risk premium - absence of financing - as opposed to expected credit losses. The plan could reveal that the liquidity risk premium was large and the capital hole in the banks is not as great as feared. Or it could show that the liquidity risk premium was not that big and the capital hole is, indeed, great.

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