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Bank bailout in US offers roadmap for crisis in Europe

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``We are more restricted now. The public concluded that the TARP was a terrible program, even though it was a good program,'' said Douglas Elliott, a former investment banker who researches financial policy at the Brookings Institution, a Washington think-tank.

``Because the public hated TARP so much, it would be very difficult to put capital into banks again, even if that were the smart thing to do,'' he added.

The likelihood of a new full-blown banking crisis in the United States seems less likely given recent actions to strengthen the sector and tougher regulations, but U.S. officials pressed European leaders to erect a strong quarantine around euro zone banks.

U.S. regulators have said American banks have minimal direct exposure to European sovereign debt, although the collapse of Wall Street brokerage MF Global serves as a reminder that crises always expose hidden problems.

Direct exposure is not the main concern. U.S. financial institutions have significant financial ties to European banks, particularly those in France, Germany and Italy.

If the euro zone's debt woes spur a banking crisis and a deep recession in Europe, the United States would feel some of the pain.


While a new U.S. bank bailout fund may be too hard to swallow politically, the Federal Reserve could almost certainly widen its safety net.

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