Treasury Secretary Geithner announced the of how the administration would use another $350 billion in emergency relief approved last year to prop up the nation's banks. There was alot of early hype created by the media about his "detailed" plan of action today. But Geithner disappoints and the markets didn't like it a single bit.
I didn't like his speech any more than the market did. But as I read his testimony later in the day, he laid out three main elements of his plan. I actually heard some new ideas that might yield really good results.
First, I liked the fact that Geithner outlined the need for a up to $1 trillion public-private partnership credit facility to allow the private sector to buy banks and bank assets. We're finally going to see some good banks created. Plus he discussed the use of the RTC strategy from the savings and loan crisis 20 years ago (although he did not outline any specifics on how he would get this done).
Second, I like the idea of a "stress test" for banks, and the idea of shutting down banks that don't meet it. We need stress tests so we know who to inject fresh government money to and who is a waste. He gave it to us. We need trillions to go to the banks to work out their problems. He said he would do it. We need the private sector to get financing to buy bad assets. He said he would provide it.
Third, he agreed to start a credit facility of up to $1 trillion to promote lending to consumers and businesses.
But overall, he fell short on what the rest of the world had expected.
No, he didn't give us the government trading desk for price discovery. No, he didn't talk about giving banks net worth certificates in exchange for notes that pay the same rate of interest. No, he didn't talk about banks forbearance and easier marking to market — that's all we wanted.
In fact, if he hadn't hyped his own speech so much, if he hadn't leaked it to the press that he had something major, he could have said "I have a long-term plan and, with patience and time, we can lick this." And then he could have given his detailed outline of his plan — and of how he would execute it — instead of his vague four points.
If he had done that, we would have had a big rally rather then todays sell-off.
Fortunately, some sources indicate that Geithner does gets the plan, which was first dreamed up by the Federal Savings in Loan Insurance Corporation — and he will get it right.
We will all hold that positive thought and expect the best… Stay tuned for more as it develops here.
|
|
|
|
|
 |
