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Pros Say: Fed's Plans Will Make Crisis Worse

Global stocks were up Monday as anticipation of the details of US Treasury Secretary Timothy Geithner's plans to buy up toxic assets boosted investor sentiment. But experts are concerned that the methods the US is using are not going to help the economy.

Fed's Plans are Worsening Financial Crisis

With the Fed pumping more liquidity into the system, this is just going to worsen the problem, says Martin Hennecke, associate director of Tyche, as that was the very misstep that caused the problem in the first place.

Concern Over Geithner's Toxic Asset Plan

Treasury Secretary Timothy Geithner
CNBC.com
Treasury Secretary Timothy Geithner

Dariusz Kowalczyk, chief investment strategist at SJS Markets, is concerned that even if the U.S. government is successful in removing toxic assets off banks' balance sheets, it will not mark a complete turnaround as there may not be enough funds to recapitalize those banks.

Geithner's Plan May Boost Dollar

If Geithner's toxic asset plan disappoints the market, John Noonan, senior FX analyst at Thomson Reuters expects to see the dollar strengthening against the Aussie and euro.

Due Diligence Integral to Success of US Plan

The key issue would be how much due diligence the U.S. government allows private investors to conduct in its toxic asset plan, says Wilbur Ross, chairman & CEO of WL Ross & Co.

Dollar a Short-Term Buy Against Majors

Dariusz Kowalczyk, chief investment strategist at SJS Markets, believes the U.S. economy will start expanding in the third quarter of 2009 but the overall economy will contract about 2 percent for the year.

Deflation Problems Outweigh Inflation

Short-term deflation is a bigger problem than inflation, says Sean Callow, senior currency strategist at the Westpac Bank.

Focus on the Good Assets

“If you spend your entire time focusing on the bad stuff, you just end up with more bad stuff. We’ve got to get the good banks working properly,” Justin Urquhart Stewart from Seven Investment Management told CNBC of Geithner’s plans to shift toxic assets from banks’ balance sheets.

No Magic Wand for Economy

"There is no magic wand, which can resolve any of these issues," Justin Stewart from Seven Investment Management told CNBC. Stewart added that the current stock rally is based on hope and should be treated with caution.

Geithner Rally Could Turn

Stocks could continue to rally in the run up to Treasury Secretary Geithner's toxic asset plan, but that could all change after his speech, Joshua Raymond from City Index told CNBC.

Doubts Over Toxic Asset Plan

There are an awful lot of question marks over what is in it for the private sector with Treasury Secretary Geithner's toxic asset plan, Peter Dixon from Commerzbank Securities told CNBC. Daragh Maher from Calyon joined the discussion.

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