Geithner’s Plan Lacks Details, Taxpayers Hosed Again
While Treasury Secretary Timothy Geithner pledged to attack the financial crisis with force today the market excitement heading into the plan’s announcement has all but faded with the S&P 500 down over 4% as of 1:40 PM.
The bottom line is that investors are worried that the plan may not be enough to loosen the credit markets. Others also feel the US taxpayer is taking on much more risk then it should. The bank aggregator proposal for example has been scrutinized heavily as an overall effective way to combat the crisis.
From the WSJ:
The plan, which is designed to involve a mix of government and private capital, aims to stabilize the U.S. financial system by injecting capital into banks, helping to determine prices of toxic assets weighing on firms’ balance sheets and stemming foreclosures.
“We believe that the policy response has to be comprehensive and forceful,” Treasury Secretary Timothy Geithner said in his speech Tuesday. “Instead of catalyzing recovery, the financial system is working against recovery. And at the same time, the recession is putting greater pressure on banks. This is a dangerous dynamic, and we need to arrest it.”
But critical details of the plan remained unanswered, despite the weeks of planning leading up to Tuesday’s announcement. Mr. Geithner said the plan to stem foreclosures would be announced in coming weeks. He also provided few details of the asset-purchase plan, which is designed to be done in partnership with the private sector.
The lack of details is a upset for many investors and we don’t blame them. Today’s Bloomberg adds some further details:
The main components of the Treasury’s package today are a joint public- and private-sector fund to buy as much as $1 trillion of illiquid assets and a $1 trillion program to supply new credit to consumers and businesses. The administration also will inject additional taxpayer funds into banks, imposing tighter restrictions that will include limits on dividend payments, acquisitions and executive pay.
“I want to be candid: this strategy will cost money, involve risk, and take time,” Geithner said today.
It seems as if the US taxpayer may end up on the sour end of the deal… again…
Tech Ticker has a good quick clip breaking down the plan today, worth a watch:
Sources:
Geithner Unveils Rescue Plan, but Details Are Scarce
MAYA JACKSON RANDALL and MICHAEL CRITTENDEN
WSJ, February 10th, 2009
Geithner Says Bank-Rescue Plans May Reach $2 Trillion
Rebecca Christie
Bloomberg, February 10th, 2009
