The European Bailout Is Not Another TARP.....

On Monday, the markets cheered for shock and awe redux, under the belief that if it worked here (in the U.S.), it will most certainly work over there (in Europe).

I am by no means a specialist in this area, but I see that there are a number of differences.

The European rescue package is not TARP 2 for a number of reasons:

* The U.S. had the resolve to implement necessary tax increases and fiscal controls. (We had only two institutions, a Federal Reserve and a Treasury Department, to dictate policy.) Do the members of the European Central Bank (ECB) have the resolve to make the appropriate sacrifices? As well, the ECB has 14 members that have a number of constituencies with differing agendas.

* In the U.S.'s TARP program, a heavy toll was taken on equity holders of American International Group (AIG) and a number of other publicly traded institutions. Will the Europeans' political realities and sometimes socialist leanings be willing to extract the skin of their own financial institutions?

* The U.S. rescue package started with an elevated dollar; the European package began with a depressed euro.

* If one of the primary purposes of this weekend's European policy move was to halt the drop in the euro, thus far, it has not been successful. The euro ended the day weaker after early short-covering. Someone doesn't believe that the policy initiatives and defense of the currency will be successful -- plus, overnight some credit metrics (e.g., two-year swap spreads) have deteriorated (though three-month Libor/fed funds spread has narrowed), as have prices for oil and copper.

On Wall Street, we too easily extrapolate trends, whether it's company earnings, industry statistics, economic recoveries, policies and rescue packages. Investors want to believe in the more or most favorable outcomes -- if the liquidity infusion worked in the U.S., it has to work in Europe. How else to explain the outsized response in yesterday's market?