U.S. vs. UK on bailout plans

We're seeing lots of governments move to announce bailout plans. In the U.S., the Treasury is working all-out to implement the freshly passed plan. Britain just announced its own three-part plan. There's a key difference in the approaches of these plans: the U.S. plan will buy up risky assets, while the U.K. plan aims to facilitate intra-bank lending as well as directly support ailing banks. Breakingviews suggests the U.S. should switch courses and follow the U.K. model. It would allow for better targeting of the banks that are really tottering and would also allow a mechanism to give taxpayers upside in the newly recapitalized entity--in the form of warrants and preferred shares. It might also have been wise to allow vulture funds to invest at the same terms. The new law might actually warrant such a twist, but it's way too late to change. That train has left the station. But if the TARP doesn't work out, there will be plenty of second guessing.

For more:
- here's the Breakingviews article
- here's a New York Times article on the British plan

Related Article:
Can we improve on the RTC bailout model?