###POV: TARP TRAP?: Reports this week (ITV,......>

UK: ###POV: TARP TRAP?: Reports this week (ITV, Sunday Times) suggest PM May's

government plans to 'encourage a crash in financial markets after losing a first

[Brexit withdrawal] vote in the hope it stampedes MPs into voting for it second

time' (Sunday Times source). 

- Former George Osborne aide Rupert Harrison (now at Blackrock) calls this the

'TARP' theory - referring to Sep 29, 2008 when the US House of Representatives

voted against the TARP bank bailout plan, but quickly changed their minds after

the biggest drop in equities since Black Monday 1987.

- If that is the plan, it may not work: Sterling may be hit, but Gilts would

likely rally, while downside on the FTSE may be limited by GBP depreciation.

- Even this would depend on markets having failed to price in a vote against the

bill, which was key to the immediate market reaction after TARP failed to pass.

- But it looks increasingly like accepted wisdom that a first vote will fail.

- Indeed by that point markets may even have priced in this scenario to such an

extent that UK assets could rally afterwards (sell the news, buy the fact).

- Ironically, such a result could even strengthen the hand of no-deal Brexiters.