A Plan?

Geithner jumped the gun. It was a huge mistake. The financial stability "Plan"? Geithner is apparently not acquainted with the dictionary. Webster: plan - to devise procedures for achieving a given objective.

From Larry Kudlow: "Geithner would have been better off not giving a speech until he could put real meat on the bones. What he pulled Tuesday was a classic rookie move that will further erode the public’s trust in his capabilities. Following the controversy over his late payment of taxes, this bank-plan blunder could be another nail in his coffin."

We have provided a background on the "stimulus" package, along with our own REAL stimulus package. We have yet to receive the call that is was accepted. OK. So we waited this am for something of substance from the administration re the bank plan, a plan which is far more key for the near-term health of our economy than any stimulus anyway.

All the market wanted to know today is how the administration will be able to help banks with their so-called toxic assets (the result of the complicity between an accommodating wall st and the left’s refusal to reform F/F mortgage creation - ground zero) while not having taxpayers get ripped off in the process. Instead, Geithner failed 1) to say how much $ will be on offer to invest in the banks themselves and on what terms, and 2) how and on what terms a public-private "bad bank" will work and how it will price these toxic assets it intends to buy.

"Details": This bad bank will be seeded with Treasury capital but largely funded by private equity or hedge funds. Geithner spoke vaguely about what amounts to a public/private investment fund that will use OUR MONEY and provide financing for private investors, who are then supposed to buy toxic assets. These investors then would have to figure out the right value. If they are right, they could get all of the upside. They would also take some (we don’t know how much) of the downside.

As another part of the deal Geithner did note that the Fed’s facility to buy collateralized consumer loans will be expanded. That is a good thing for consumers.

Finally, there was little re the mortgage market aside from a promise of a detailed plan later.

A real problem for us is that the presentation was laced with partisan politics and a misguided ideology to boot. How can any of us respect this individual? He started out by attacking supply siders and the Bush tax cuts, adding that these have only added to our problem, "..only helped lead us to the crisis we face right now." Blaming the Bush tax cuts for the crisis is false, it is a partisan construct and a lie. Naturally our pals from the left, reciting the party line pretend to abhor tax cuts, relying less on scholarship than sound bites fed to them by the DNC. They may not recall, or pretend not to recall the super successful Kennedy-Johnson tax cuts of the 60's nor the successful Reagan tax cuts of the 80s. But Geithner knows better.

Robert Craven