From Peter Tchir of TF Market Advisors

The best analogy I have heard so far about today's European Solution is that EFSF is being asked to do a lot of what TARP did for the U.S.  I cannot disagree with that assessment.  The EU is clearly pushing it well beyond it's original design. 

The question that remains to be answered is, who would fund the EFSF?  There are stories that EFSF might buy assets from the ECB at cost.  It is clearly going to lend to countries at rates that are massively off-market.  It may buy debt in the open market?  It may recapitalize banks?  I am not sure it can have such a broad mandate and get the rating it needs or to get outside investors.  What private investor would have lent to TARP? 

I think for this program to work, Germany and France will have to suck it up, skip the whole CDO methodology and just fund the EFSF directly.  TARP only worked (or got the money it needed and was flexible enough) because the U.S. government gave the treasury carte blanche to do what they wanted. 

I doubt private investors will lend money to the EFSF with the carte blanche mandate.  If the CDO and guarantee charade doesn't work, will Germany in particular, step up and fund it directly?  Is there the political will?  Lots more to figure out as the details are announced - but it is worth keeping in mind that so many other proposals didn't work because the people making the proposal hadn't involved all the concerned parties.  In the meantime other countries must be figuring out how to access some of that 15 year 3.5% money.