Might Not Want to Bother Unpacking, Tim
Boy, Tim Geithner just did a terrible job introducing his Financial Stability Plan, on every level.
First of all, there isn’t actually a plan – it’s more a series of goals and principles, and in some cases even that’s generous. There’s a lot of “we’ll increase transparency by working with the SEC to increase transparency” and “we’ll set up a comprehensive stress test that will increase confidence” and “we’re committed to continuing to work toward lower mortgage rates.” These are not specific actions of any kind.
As a consequence of the above, I get two very bad impressions about where we’re going. Geithner and the Administration generally probably haven’t come to any substantive conclusions about what needs to be done. Therefore, they are going to continue down pretty much the same road laid out by Paulson and Bernanke – and probably in a similarly ad-hoc manner. Which is not particularly encouraging.
And the atmospherics reinforced these negative impressions. I know it shouldn’t matter, but Geithner looked and sounded like an elf giving a book report, not a Treasury Secretary. More significantly, he spent a great deal of time blaming the previous Administration for not acting boldly enough before unveiling this decidedly unimpressive package of semi-proposals.
I came in predisposed to like Geithner. He’s somebody who showed evidence of understanding the credit derivatives markets before they became a central player in a financial crisis. He understands Wall Street but isn’t beholden to any Wall Street firm – as a long-time government employee, he could be truly independent in the way that a Treasury Secretary should be. And he had a reputation of being a “no drama” kind of guy. But this was a spectacular flop of a speech. And if we’re going to see more of this, I wouldn’t expect him to last too far into this Administration. Obama’s not known for hanging on to people who become liabilities.
Brooks disagrees.
You guyz increasing sound like the bitter angry dwarves in CS Lewis’s The Last Battle.
Your defeat poisons everything for you.
Servants of Tash.
— matoko_chan · Feb 10, 07:24 PM · #
Brooks “disagreed” before the thing had even been unveiled, which I thought when reading it was a little … giddy. So somehow I don’t find Brooks’ usually reasonable opnion that the thing is a masterpiece of harmony and balance particularly reassuring at this juncture.
— Sanjay · Feb 10, 07:37 PM · #
“Geithner and the Administration generally probably haven’t come to any substantive conclusions about what needs to be done.”
Unless you’ve been advocating for $2 trillion stimulus no one has come to any substantive conclusions about very much. But if we’re judging Geithner on style points then, yes, things don’t look promising. But let’s take the long view.
— ron · Feb 10, 07:42 PM · #
Apparently the markets are none too reassured either…awesome.
— Sanjay · Feb 10, 07:45 PM · #
We don’t have the luxury to wait for masterpieces.
— Freddie · Feb 10, 08:28 PM · #
And that well meaning evangelical bumbler GW has already exhausted the device of slashing the Fed interest rate, hasn’t he?
What is the rate now…. half a percent, right?
There is no hysterisis left.
How can things possibly look promising?
— matoko_chan · Feb 10, 08:38 PM · #
The real question is…..is this better than nothing?
Cuz nothing is what the bitter-angry-dwarves/republicans are offering.
— matoko_chan · Feb 10, 08:49 PM · #
Freddie, we’re not waiting for a masterpiece. We’re waiting for anything concrete. He’s not talking about the “stimulus,” here (and incidentally I’m not all that clear that we can’t wait, actually). He’s talking about Geithner’s TARP proposal, which Obama’s had months to put meat on. And there’s not much there. This is just more of what Paulson was doing: it’s a bunch of vague principles and ad hoc responses.
Which I think hits makoto_chan’s “comment” as well. Not that Bush lowers the Fed interest rate….
— Sanjay · Feb 10, 08:49 PM · #
Oh please.
I’m not a retard.
Bush colluded with Greenspan to artificially lower the fed rate.
And then again with Bernanke when the credit markets refused to thaw.
It is at freakin’ one-half percent…..it CANT go any lower.
— matoko_chan · Feb 10, 09:13 PM · #
How about Obama puts forward a plan to help Americans make money, especially in export industries, such as by lifting a lot of the environmental and affirmative action regulatory burden on exporters?
— Steve Sailer · Feb 10, 10:16 PM · #
Because that is what you conservatives want him to do, and we have decided through the power of empirical data that any of your plans basically sukk.
— matoko_chan · Feb 11, 12:30 AM · #
The guy’s a technocrat. They have a framework but are obviously going t act tactically as they need to. That is not a bad thing. Neither am I particularly concerned about what happened on wall street today. What fell today was the banks and that was because Geithner didn’t start sending loads of cash in their direction. Wait til the end of the week and I’m going to bet the market is back above 8000!
— John · Feb 11, 01:03 AM · #
It seems there has been a 10th planet influencing the Treasury and the Federal Reserve. Consider what has not been implemented (or even proposed?) by anyone in an official position:
1. The Swedish road map (full disclosure and partial nationalization);
2. A debt-for-equity swap for Fannie Mae and Freddie Mac.
3. A bonds-for-equity swap for distressed banks (Prof. Zingales’ idea)
4. A template mortgage replacement programme (some variation on Prof. Feldstein’s idea – knock off a portion of the principal computed according to the local Case-Schiller Index in return for the borrower accepting that the revised loan is a full-recourse loan).
5. Allocation the residual TARP funds (or some equivalent amount) to the FDIC and allied agencies. The maintenance of financial intermediation through fractional reserve banking would seem to require that depositors (and, if you must, purchasers of commercial paper) be made whole, not the other stakeholders. The Federal Reserve can substitute for inter-bank lending.
6. Legislative annulment of credit default swap contracts.
The President’s people have had three months to cook up precise proposals. With regard to the peregrinations of both the current and previous administrations, one might note that banking crises are hardly unprecedented and there have been a half-dozen notable ones in the last decade. Why were there not contingency plans in place? Is a failure to act due to the injury that might be caused to vested interests (as it appears to be with regard to the auto industry)? Is there some other explanation?
— Art Deco · Feb 11, 03:53 AM · #
“Because that is what you conservatives want him to do,”
Thanks for taking us back to middle school! Change we can believe in.
“…and we have decided through the power of empirical data that any of your plans basically sukk.”
Wow, with tha grasp of economics maybe you could be SecTreas!
Stay classy.
— GuyIncognito · Feb 11, 04:28 PM · #
If we’re going to make the reaction of Wall Street and a few mad money type cable tv shouters the means by which we judge the value of what Geithner announced yesterday then we have a problem. The market which btw was relatively light in volume fell for a number of reasons yesterday. Profit taking after a short rally, selling the news, and some disappointment that the semis were not being loaded with dollars to buy all that bad stuff on the bank balance sheets. Geithner laid out some principles and he’s going operate tactically depending on what he finds out. This is good folks. It’s probably going ot involve some bank nationalisations but I don’t want him jumping into that right now. Chill out the market will be back above 8000 by Friday.
— John · Feb 11, 07:01 PM · #
Wow, with tha grasp of economics maybe you could be SecTreas!
Well I certainly could have done a better job than your guy.
What’s the prime again?
How about that national debt, lol.
— matoko_chan · Feb 12, 03:10 AM · #