Wednesday, 11 February 2009

Geithner's Farcical Non-plan Plan

Did anyone actually watch the farcical theatre that was supposed to be Tim Geithner's coming out party yesterday? Geithner was expected to give us a comprehensive plan for dealing with the current banking crisis, more specifically a resolution to the toxic assets on bank balance sheets.

What we got was, well we've been kicking around a few ideas but we haven't decided on anything yet. No specifics just some broad brush ideas that clearly haven't been fleshed out in any detail. I found the whole thing quite stunning and so did the stock market, promptly selling off about -5%. Yves at Naked Capitalism summed it up well.

Geithner Plan Smackdown Wrap

I cannot recall a major US policy initiative being met with as much immediate revulsion as the so-called Geithner plan. Even the horrific TARP, which showed utter contempt for Congress and the American public was in some ways less troubling....

....Treasury Secretary Geithner presented today what in essence was a plan to come up with a plan. I now understand why he is so loath to have government run banks. He presumably sees himself as an elite bureaucrat, as his glittering resume attests. Yet the man has a deadline to come up with a proposal, yet puts off presenting it twice (the "oh he has to work on the stimulus bill" is as close to "the dog ate my homework" as I have ever seen in adult life). What he served up as an initiative is weeks to months, depending on the item, away from being operational (if even then; the public-private asset purchase program will either not see the light of day, or be far narrower and smaller than what is needed).

And in case you think I am being unfair, yesterday I got an e-mail from a political consultant who got a report on the Senate Banking Committee briefing by the Treasury the night before the announcement. No briefing books, no documents. He deemed it to be no plan. That assessment was confirmed today by a participant at the session, who said that the details were so thin that one staffer asked, "So what, exactly, is the plan?" and repeated questions from one persistent Senator got "absolutely no answers".

Click on the link for the full article, it is well worth a read. I don't envy Geithner's job, the task is enormous but this was a huge PR faux pas. This from the administration that ran the most flawless presidential campaign in history.

The troubling thing is that the current administration, just like the previous one, is too frightened to put down their foot, close some of these clearly insolvent banks, wipe out the shareholders and bondholders. Instead the government seems to want to sustain it's own version of the Japanese zombie banks of the 1990's.