The longer I think about it, the more shocked I am at how badly Treasury has handled this. First, they refused to consult with banks or, apparently, too many Bush administration officials, because they didn't want the plan "tainted" by such seedy associations. Since as far as I can tell these two sources have custody of, to a first approximation, 90% of the information needed to make a plan work, this was moronic. It was a classic technocratic error, thinking that a pure planner should operate without regard to the desires of the grubby, greedy people they're supposed to regulate.
Treasury didn't just fail to deliver a plan; it actively made things worse. At this point, the uncertainty in the markets about the uncertainty of various financial institutions is making it more likely that those institutions will have problem--no one wants to invest in a bank that might be nationalized, and no one wants to deposit substantial funds in a bank that might not. A plan would at least have shown some committment in a specific direction, even if its details had to be changed at a later date. Right now, Geithner has implicitly left all options on the table.
2.18.2009
Geithner
I think Megan McCardle's right about the WaPo story from the other day about Geithner's handling of the TARP2 rollout (posted below):
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2 comments:
I think it's because he doesn't know what to do. No one knows cuz nothing works. lehman bros was an experiment to see what happens when a bank fails and it was more destructive than Paulson or Bernanke thought. There's so much system risk out there it's probably impossible to know which button to press that will screw things up the least.
I am less concerned about how the markets react to a vaguely worded "plan" in a day, a week, or even a month, and more concerned that we get the financial bailout right to set up the recovery for the long term.
VH1
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