TARP 2: What, No Aggregator? – Mostly Thumbs Down
The much anticipated revamped bailout plan outlined (in very broad terms) by Treasury Secretary Tim Geithner disappointed the markets big-time.
Felik Salmon at Portfolio.com typifies the reaction:
“The speech was surprising only in its vagueness. It’s been over 11 weeks since Obama’s announcement, and this is the best that Geithner can come up with?
We are exploring a range of different structures for this program, and will seek input from market participants and the public as we design it.”
Paul Kedrosky is on the same page:
“The Geithner non-plan TARP 2 plan is now (mostly) out, and it is about as complex, dubious, over-engineered and sketchy as expected. The non-plan plan — Tim G. calls it a framework, which is offensive to frameworks — involves enough moving parts to be an economist full-employment act; it is a druidic mixture of regulatory capture, cute grad-school theorizing, and look-ma-no-socialism here.”
Martin Wolf in the Financial Times takes perhaps the gloomiest view this side of Nouriel Roubini, already dubbing the plan a failure:
“…If Mr Obama does not fix this crisis, all he hopes from his presidency will be lost. If he does, he can reshape the agenda. Hoping for the best is foolish. He should expect the worst and act accordingly.
…Yet hoping for the best is what one sees in the stimulus programme and – so far as I can judge from Tuesday’s sketchy announcement by Tim Geithner, Treasury secretary – also in the new plans for fixing the banking system.”
For his part, Roubini says the U.S. government will have to nationalize some of the biggest banks because they are now “effectively insolvent.”
But David Brooks in the New York Times likes what he hears so far:
“Geithner’s plan is huge but also disciplined. It’s designed by someone aware of government’s limitations….The whole policy is still unfolding. But one gets the sense that it is being designed to fit the crisis, not a prefab agenda.”
The Economist, which offers a good summary of the key elements of the plan, takes a middle path:
“Overall, this is a big package. But it will strike some as timid as well as vague. The idea of a government-owned “bad bank”, which would take banks’ worst assets off their hands, had become increasingly popular in recent weeks as it seemed to offer a clean break. Mr Geithner looked at it closely. Why he rejected it is unclear, but he may have deemed the up-front cost prohibitive, and he is clearly taken with the idea of a big role for private buyers. Markets are no clearer now about how toxic debt will be valued and isolated than they were before.”
And Wall Street’s verdict? 382 thumbs down.
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