I listened to Geithner's speech four times, and took notes. He made some of the right noises, but the devil always is in the details -- and the details were conspicuously absent.
He said that "gradualism" won't do -- except, I suppose, for announcing the specifics of the new administration's approach -- and warned against making the mistake of "applying the brakes too early." He made a lot of noise about transparency. Okay. Swell.
He spoke of a "comprehensive stress test" for banks, with government agencies assessing bank balance sheets. Does that mean government will take on the task of valuing all those frozen assets? No, I guess not, because he gets to that later, in a different context. Anyway, the banks get to draw on a "Financial Stability Trust" as a "bridge" to private capital. Do banks have to pass the "stress test" -- demonstrate that they still have some net worth -- before they get to draw capital from the FST?
Valuing the frozen assets, apparently, will be done by defrosting them. Geithner spoke of a trillion dollar "public/private investment fund" that would use government capital to "leverage" private capital, and start the unsalable securities selling again. What role will government play, and what will be necessary to get the hedge fund managers and other investors interested in buying? Nobody seems to know, but the term "bad bank" keeps coming up in the news analysis.
One thing I do know is that every time I hear the phrase "public-private," my blood runs cold. Typically, "public-private" means the public absorbs any losses while the private sector absorbs any profits -- more corporate socialism.
Another trillion, from the Treasury, the Fed, and the FDIC, will go to "support" consumer and business lending. This sounds a bit like my "good bank" idea, but I have a bad feeling that some way will be found to further enrich a bunch of private bankers in its application. As for foreclosure relief and regulatory reform -- well, maybe we'll hear something about that next month (!)
In the meanwhile, I haven't heard anybody in the administration openly criticizing the Senate's 50% cut in the amount of aid to states that will be in the upcoming stimulus package. Of course, it makes absolutely no sense for the federal government to try to stimulate the economy and create jobs while state governments are forced to decimate spending programs and throw vast numbers of state workers out of work -- unless, of course, you're a Republican.
Obama should take the time to listen to Rush Limbaugh once in a while, and he might wake up to what the Republicans really are trying to do. Rush openly states that he wants Obama to fail. Guess what, Barack? So does almost every Republican in Congress. They don't care at all if the country sinks into Great Depression 2.0 provided they can get back into power. You're still singing Kumbaya, Barack, but nobody's singing along.