March 23, 2009

"While this crisis was caused by banks taking too much risk, the danger now is that they will take too little."

Geithner's plan.

ADDED at 8:52 a.m. Central Time: Politico:
Overheard: A conversation between two reporters at the White House after Tim Geithner's morning pen and pad briefing.

"I survived Geithner. I can survive anything," one reporter said.

"He didn't exactly instill confidence, did he?" the other responded

But the stock market is up. Right now at least.


rhhardin said...

Add to the risk they'd be taking the populist rage political risk, which Obama is only too happy to play.

Capital is going to flee to some other country pretty fast.

AllenS said...

Just print another trillion dollars, that should reduce the risk of failure.

Maguro said...

But who will want to partner with the government and risk becoming a whipping boy for Barney Frank and the rest of the outrageously outraged politicians in Washington? I would certainly think twice before signing a deal with these guys.

Fred4Pres said...

"It is by will alone I set the economy in motion. It is by the juice of the fed that money acquires speed, the inflation rate grows, the deficits become a warning. It is by will alone I set the economy in motion." Tim Geithner

Pogo said...

Democrats driving an economy into the ground.
What a surprise.

And a little child shall lead them.

Bissage said...

None of this loose talk about the economy -- none of this economic booshwah -- is going to stop me from doing the best I can with what I’ve got.

That's true for pretty much everybody else living here on Planet Reebok® isn't it?

We're all doing the best we can with what we've got.

And there's comfort to be found in that.

Same as it ever was.

Same as it ever was.

Same as it ever was.

Quayle said...

Edict to the banks: You better be successful!

Edict to the bank executives: You better not be successful!

The insanity in Washington DC continues - both ends of Pennsylvania Avenue, and both parties.

If the ruling politicians are so worried about the bank bonuses, why not just require that any bank taking money from the Federal government immediately turn over its control and management to ACORN.

It would clarify the picture and save us a lot of time wondering how things are going to turn out.

Fen said...

The worst of it is the new landlords. If we have to learn a new language, couldn't Obama have picked something easier than Mandarin Chineese?

EDH said...

I'm sorry to bring up looks. Actually, it's more about expression.

But could you ask central casting for a more consistently diabolical looking henchman than Tim Geither?

The Drill SGT said...

The bad thing about this plan is that it looks like Fannie MAE writ large.

Upside, investors get rich

downside, government protects investors and eats the loss

An RTC2 seems to make more sense and it worked before. We have lessons learned, and it made money for the FED.

Korla said...

Oh, the BANKS took too much risk? So, it's not like they were forced by the Federal Government to take on bad mortgages from people who had no way to pay them back. Oh, no.

Yes, blame the victim. Then punish them with more taxes. Then threaten them and their families with rent-a-mobs and busloads of menacing pinkos.

Then, lament that they might not be wiling to take on more "risk."

Similar to indicting Scooter Libby for drummed up perjury charges, based on an insignificant trifle, and then wondering why others are unwilling to give testimony.

Maybe it's because people learn not to trust you after you stab them in the back repeatedly enough.

Peter V. Bella said...

While the crisis was caused by banks being forced by the government to take on too much risk, the danger now is that they will take too little unless the government forces them...again

There, all fixed.

MadisonMan said...

How come no one is mentioning the Stock Market anymore?

Pogo said...

Most of the people I read are calling it a sucker's rally.

I hope they're wrong, but given the other remaining shoes about to drop, I doubt we're at the end of the stock slide

rhhardin said...

I like Geithner. Too bad he's stuck with Obama.

Geithner strikes me as interested in side effects, which is a good idea in economics.

No direct action ever works. Intention counts for nothing; something else will happen that, following Le Chatlier's law, defeats it.

You have to take that into account, and design something that allows for human motivations.

LarsPorsena said...

"How come no one is mentioning the Stock Market anymore?"

Dead cat bounces are not interesting.

Quayle said...

I too like Geitner. Smart guy. Knows the markets.

And I feel bad that it feels like he is also the person most likely to be thrown under the bus when it becomes necessary in the future.

Dust Bunny Queen said...

Dead cat bounces are not interesting

Least of all to the dead cat.

Chip Ahoy said...

The crisis was caused by banks being coerced to take too much risk, by acts of congress. Can we please get that straight? Conclusions remain fallacious and thinking remains clouded until we get the premises right.

Bankers are by nature exceedingly fiscally conservative. Until the system is gamed by government and non-fiscal values are jostled that affect their rational self-interest. Their auditors are audited who in turn are audited, and of course, they're rated in accordance to their CRI compliance.

Sofa King said...

At the moment it's a Schroedinger's Cat bounce. It is both alive and dead in an indeterminate state, and only once we observe the Geithner plan will the wave function collapse and it become one or the other.

azlibertarian said...

Regardless of (or perhaps, because of) whatever plan Zero, Geithner and Bernanke can cobble together, my crystal ball is telling me the Dow Industrials will be somewhere between 5494 and 6077 sometime between Mar. 30 and April 16.

Do Your Own Due Diligence; Your Mileage May Vary; I Could Be Wrong.

jayne_cobb said...

Hey, if it continues to rise at this rate for about a month or so then I'll believe it (same for any sudden drops); otherwise it just may be another suckers rally like those back in September.

The danger for Obama is that all the unforced errors outside of the stock market will overshadow any rebound there. Don't forget that Bush got us to 14,000+ but that hardly helped him politically.

If Obama's former cheerleaders in the media are having doubts I think he may have already crossed this line.

Methadras said...

This type of Kabuki just doesn't get any better does it? This type of lying, hiding, & political maneuvering makes me yearn for the Bush II years.

Michael Hasenstab said...

Suppose for a minute that you are president of a very large hedge fund and you are carefully evaluating Geithner's proposal.

Which outcome is worse?

(A). You underestimate the risk and your fund winds up losing the highly leveraged money it invests, or,

(B) You nail it just right and your fund makes a substantial profit, for which you receive a large bonus.

Do you want this opportunity, or are you going to pass?

I'd pass. The government can change the rules later, and you could get AIG'd by some Congressional nutjobs.

Joe said...

With the upcoming change of mark-to-market rules, I think most banks are going to realize they are stronger financially than the pessimists make out. Given the capriciousness of Congress, it's best to steer clear of any government help. Expect, though, for the government to FORCE their "help" on banks.

Understand one thing, no matter what happens, the government will continue to massively overstate the risk of not-intervening.

AJ Lynch said...

I agree with Pogo.

In the next 4-5 months, it will start to feel like stuff is returning to normal.

Then in late summer around Aug-Sept, they are gonna find a bucnh of those shoes Pogo warned about. The shoes will start falling hard.

That will lead to a sorry and tough five year climb back.

So my advice is save your money.

Fen said...

There's also external factors that will be in play. Remember the retail slowdown post 9-11 because no one wanted to go shopping at their local malls?

Combined arms. OPEC tightens up the spigot or China sells the dollar, combined with an attack on American soil. Probrably from one of the "non-belligerants" released from Gitmo.

Tim G. said...

But the stock market is up. Right now at least.

Actually, markets have soared. But I'm sure you'll find a way to spin it as a negative for Obama.

BJM said...

EDH, Geithner always looks as if he is working on something caught in his teeth and he has a difficult time finding his eye line on camera which makes him appear shifty.

Isn't this basically the Paulson plan? Why the hell do we need Geithner?

Balfegor said...

Actually, markets have soared. But I'm sure you'll find a way to spin it as a negative for Obama.

Well, it's a positive for Geithner, at least. Good job Obama, keeping him on. We'll see how it turns out over the year to come, but for the moment, it seems to have overcome the administration's longstanding problem, viz. that whenever Obama or Geithner come onscreen to talk about the economy, the markets plummet in despair. Used to, that is, now.

Next step -- Obama needs to restart the FINSOB oversight of TARP funds that he's ignored. And finish staffing the Treasury.

BJM said...

Bissage, you're right, people are hunkering down and making do with what they've got. I'm doing with a great deal less to starve the beast. 2009 will be the first year since '60 that I have not had taxable income.

I recently needed to have a few garden items powder coated and the company that I 've dealt with for years is closing up, retiring. Same with the tree service I called to remove some winter damaged limbs, his insurance premiums skyrocketed so he's going fishing. My fav local cafe closed after 28 years when property tax hikes became impossible to offset.

jayne_cobb said...

I suppose the question now becomes:

What are they going to do about the steady rise in oil and increased inflation, which could undo anything they might accomplish?

Of course that assumes that this isn't a suckers rally and they can focus elsewhere.

blake said...

Darn those people, trying to act in their self interest!!

How is our system supposed to work if they do that?

David said...

Reporter says: "He didn't exactly instill confidence, did he?"

Nor does MSM reporting on economic issues. Media completely missed the coming storm, and now covers it miserably. They feed the frenzy.

Geithner is a backroom guy who has been put in a job that requires him to be in front of a microphone. He has made mistakes and will make more, but at least he's willing to put his reputation on the line to do a difficult and thankless job.

What are those reporters putting on the line every day?

Revenant said...

Actually, markets have soared. But I'm sure you'll find a way to spin it as a negative for Obama.

Since Geithner made his disastrous initial "we have a plan to have a plan" announcement on February 10th, the market has dropped 1700 points and rebounded 1200. I'm glad that Treasury is finally starting to get its act together. But I don't see how you can rationally chalk this up as a win for Obama when, thus far, he's still climbing out of the hole he dug.

I'll also be curious to see how successful they are in attacting private investors, in light of Congress' recent position that anybody who goes into business with the government can have their earnings confiscated. I'm certainly not interested.

Peter V. Bella said...

You eft out one important point. In order to recoup losses, the market must rebound twice its loss; the market dropped 1700 points so it must rebound 3400 points to break even.

Revenant said...

You eft out one important point. In order to recoup losses, the market must rebound twice its loss; the market dropped 1700 points so it must rebound 3400 points to break even.

Um, I "left it out" because it isn't even vaguely true.

rhhardin said...

He's remembering something about percentages, I'd guess.

kentuckyliz said...

Well, will someone please tell me, how to discern when the dead cat stops bouncing and comes to rest on the floor?

I don't want to catch a falling knife. I was forced to lock in some serious losses and am feeling kinda raw. Like freshly gang raped raw.