Tuesday, February 17, AD 2009
I posted last week about the negative reception to Geithner’s bank plan. Here, for instance, was Paul Krugman’s take:
It’s really not clear what the plan means; there’s an interpretation that makes it not too bad, but it’s not clear if that’s the right interpretation….So what is the plan? I really don’t know, at least based on what we’ve seen today. But maybe, maybe, it’s a Trojan horse that smuggles the right policy into place.
Not exactly an enthusiastic endorsement. Today’s Washington Post has some of the back story:
Just days before Treasury Secretary Timothy F. Geithner was scheduled to lay out his much-anticipated plan to deal with the toxic assets imperiling the financial system, he and his team made a sudden about-face.
According to several sources involved in the deliberations, Geithner had come to the conclusion that the strategies he and his team had spent weeks working on were too expensive, too complex and too risky for taxpayers.
They needed an alternative and found it in a previously considered initiative to pair private investments and public loans to try to buy the risky assets and take them off the books of banks. There was one problem: They didn’t have enough time to work out many details or consult with others before the plan was supposed to be unveiled.
The sharp course change was one of the key reasons why Geithner’s plan — his first major policy initiative as Treasury secretary — landed with such a thud last Tuesday. Lawmakers, investors and analysts expressed dismay over the lack of specifics. Markets tanked, and fresh doubts arose about the hand now steering the country’s financial policy.
Public acceptance of the plan suffered from several missteps, said sources involved in the decision-making or in close contact with those who were.
The Obama administration, they said, failed to rein in the grand expectations built for the plan on Wall Street and in Washington, concluding that they would rather disappoint the markets with vagueness than lay out a lot of details they might have to change later — a failing they saw in the Bush administration’s handling of the crisis.
Meanwhile, the sources said, Obama’s senior economic advisers were hobbled in crafting the plan by a shortage of personnel. To date, the president has not nominated any assistant secretaries or undersecretaries at the Treasury, and the handful of mid-level staffers who have started work were still finding their offices and getting their building passes and BlackBerrys.
I guess the only question I have is: why couldn’t they wait a couple of weeks to get it right? To paraphrase Mark Twain, it’s better to keep quiet and be suspected of not having a plan, then to open one’s mouth and remove all doubt. Hopefully Geithner et. al. will do better in the future, but this was not a promising start.
Also, Darwin’s post today is really good.