Busch: Miracle on Wall Street?

Like everyone in America yesterday, I watched intently as US Airways Flight 1549 crew and passengers were rescued from the frigid waters of the Hudson River.

Remember, it wasn't too long ago that a plane ditched in the waters by our nation's capitol and all were lost. It is truly a miracle that so many ferries were nearby and all got out with nary a bump or bruise.

A similar event took place yesterday in the markets.

As the Dow combed the depths of the day, there seemed to be a "miracle landing" that led to a rebound as disaster was averted. How did this happen? It seemed to rely on the skill of the US House of Representatives approving a stimulus plan and the Senate approving the release of the 2nd half of the TARP money.

With a rallying cry of "a crisis not seen since the Great Depression", the members approved a $825 billion stimulus plan that may not see its full force come into effect until late 2009 or early 2010.

It's a two year package that has $275 billion in tax relief and $550 billion in new spending. As I warned earlier this week, this will take the budget deficit to $1.8-2.0 trillion in 2009 and will trigger a debt issuance the world has never experienced.

The most beneficial components to the plan are the tax cuts and the business depreciation for investing in new plant and equipment. Also, losses taken this year can be refunded on taxes paid all the way back to 2003. In a nod to how angry voters are about bailouts, they have banned TARP recipients from participating in these tax programs. There is a chunk of money ($212 billion) going back to the states that includes $90 billion for Medicaid, $79 billion for education & other services, and $43 billion for the infamous "shovel ready" projects. There is even a safeguard provision that mandates governors and mayors personally certify that every expenditure under their jurisdiction is appropriate.

In Illinois, we already do this under Blagojevich's "one for you, one for me" program.

Noticeably absent, any provisions or metrics for reducing the stimulus or spending once the economy stabilizes. I realize I run the risk of being concerned about the furniture getting wet as the firemen are putting out fire, but this is absolutely the best time to implement the rules. Congress did this when they put the Bush tax cuts in place, why can't they do it now? This would provide a major blanket of cover for the markets as the concern over new spending becoming permanent spending bleeds into on-going appropriations.

For now, everyone's pleased with BofA getting a new infusion, TARP getting released, and a stimulus plan that's taking shape. The equities rallied from 8,000, the US dollar topped over 85, and the 10 year yield bottomed at 2.15%. Friend and neighbors, the devil's in the details and that ain't no miracle .

(* This Programming Note: I'll be on today's Closing Bell at 4pm discussing whether US banks should be nationalized*)



Andrew Busch

Andrew B. Busch is Global FX Strategist atBMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor.He can be reached here .