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Tarp-watch becomes ever more tortuous. On Monday, equity markets cheered European government intervention to shore up their ailing financial sectors. That ensured a rapturous reception for the latest US instalment of the troubled asset relief programme. In reality, though, there was little to digest. There is however more meat now being added to the bones.

Certainly, Monday’s offering was overburdened with minutiae on process and lacked the ambition and sense of urgency on display across the Atlantic. The point-by-point elucidation of seven policy teams smacks of a bureaucracy lumbering into action. The emphasis that the spoils of managing the Treasury’s fund be spread round a variety of small, minority and women-owned businesses, while laudable, is also an odd priority when faced with all-out financial collapse.

Meanwhile, the trickiest niggles of the original Tarp plan, notably how to price assets, remain almost entirely unaddressed. That reflects the fact the US asset pricing strategy for resolving this crisis has become peripheral. Broad support for the UK model of capital injections into banks, along with sweeping guarantees, has inspired the US authorities to act. Tarp now includes an option to take equity stakes in financial institutions.

The next US step, expected on Tuesday, is to beef up this arm of an increasingly broad approach. Enabling banks to leverage up on fresh capital, injected via preferred stock and warrants, will provide more bang for the public sector’s buck in boosting lending than a complicated reverse auction of mortgage assets. For Monday’s rally to last the week, the US must wrest the initiative back from Europe.

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