Treasury Plan to Slow the Economy and Indeed Contract For Years to Come
Here's why:

This TARP or whatever the final plan is, is forced saving on the US economy. We (Tsy, Congress, Fed) are now moving beyond a typical slowing of the economy (we have gone from +4% GDP growth to +1% in this cycle) to an actual secular/cyclical contraction the likes of which we haven't experienced since WWII.
IF the Tsy is to borrow $700bln to purchase mortgages and other bad debt (the assets the Tsy can buy is very vague on purpose in the TARP as the Tsy wants maximum flexibility) a high proportion of that debt will be to buy US obligations to foreigners) will have a serious dampening impact.
It's like this: if you borrowed money from the SBA to start a small business and then the SBA changed their mind in these two ways:
1. SBA says they will only give you 80% of what they originally said they would loan you. You would slow your purchases - like not buying a car or your wife not buying a dress. That has cyclical slowing impact on the economy. (this scenario spread out across an economy takes GDP growth from +4% to +1%)
2. SBA says not only are they not going to lend to you as much as you expected (your plans and spending are based off your expectations), they are demanding you repay the entire loan right now. This causes what I described in today's Report as "Forced Saving". You would move beyond slowing your purchases to actually selling assets of your business. This has significantly more negative impact on US economic growth... no doubt in my mind that this would take us to a series of qtrly negative growth rates.
TARP is option #2....that's the analogy.
-Remember the UK example of 1989-90 when their housing market contracted but slowly (not one fell sloop) it led to the UK saving rate going from -2% to +4% in 2 short years that led to the worst economic recession for the UK since WWII. .....
Net/net: I argue that TARP will have a long-term dampening impact on the US economy that will occur for years to come.... it is going to force the US to save. We have never had anything like this ...except during wartime....