Dr. Jeffrey A. Michael, the director of the business forecasting center at University of the Pacific, said he has complex feelings in regard to the bank plan unveiled Monday.
Michael said the public-private investment plan to purchase the bad loans or "toxic assets" is primarily a means to determine a price for the assets and not to ease the burden on the taxpayer-funded portion of the plan.
With that in mind, Michael said he still has a certain degree of wariness toward the plan.
"The taxpayers' money is at risk," he said, adding that the private sector may not be able to buy out the bad loans and the government would be compelled to move toward direct ownership or nationalizing banks.
The positive news from the market can't really be seen as evidence of the plan's soundness because it's just too early to know if the plan will work.
"It means the news is good for the owners of the financial stocks," he said.
Michael holds a Masters Degree in resource economics from the University of Maine and a Ph.D. in economics from North Carolina State University. He said if banks can stabilize their balance sheets and start lending, that will obviously mean that part of the plan has been a success.
If, however, several years later the bad loans, or toxic assets, turn out to be worth far less than what the government pays for them, then the plan may not be viewed as much of a success.