Secretary of the Treasury Timothy Geithner took to the podium today to announce the long awaited and oft delayed Obama bank rescue plan. He laid an egg. The market dropped nearly 5% with the Dow Industrials down 385 points.
Not only did Geithner seem out of his element and in over his head, the “plan itself lacked detail”. Well, it did have a few details, there is going to be more regulation, always a popular item with business, and the government is going to “stress test” banks. Since no one knows what “stress testing banks” will mean, banks sold off sharply.
At some point the administration must recognize that the problem is housing. Until they fix the housing problem, bank balance sheets will continue to erode, along with business and consumer confidence; banks will refuse to lend and the downward spiral will continue. Geithner did not address housing until well into his comments, and then only tangentially. It appears that the administration does not have a plan after all.
With three months to prepare for this juncture, the Obama administration is off to a poor start. They need to do much better, and they need to do so soon. The occasional rant against Wall Street is not a plan.
So to borrow a phrase, “It’s housing stupid”!