More than five weeks ago, Barack Obama told the nation that Tim Geithner would unveil the administration’s plan to resolve the banking crisis and restore credibility to the markets the very next day. When the very next day arrived, Geithner arrived with some slogans tied together with hundreds of billions of dollars — and Wall Street ran screaming for the hills. Thirty days later, McClatchy notices that Geithner and Obama still haven’t produced a plan:
The Treasury Department has failed to persuade the world that it has a viable plan to stabilize big U.S. banks, and unless and until it does so, the economic downturn at home and abroad is unlikely to bottom out.
Federal Reserve Chairman Ben Bernanke has said as much, telling Congress last week that “restoring a reasonable degree of financial stability will be critical determinants of the timing and strength of the recovery.”
Yet experts warn that each week that goes by without a credible bank plan puts an economic recovery and public confidence in President Barack Obama at risk.
Kevin Hall notes that Geithner and Obama have fallen into the same trap as Hank Paulson and George Bush in the final weeks of the previous administration. They have correctly identified the biggest problem: the toxic assets linked to the massive, government-inspired lending bubble. Instead of spending the TARP monies on that issue, though, Geithner and Obama have instead tried everything but addressing the core issue of the collapse. Hundreds of billions of dollars have gone to floating private institutions that invested heavily or insured toxic assets without actually dealing with the poison itself.
Obama keeps promising to deal with the actual problem, but weeks after saying a plan was imminent, investors have yet to see anything. Instead, Obama seems more interested in Deadbeatonomics, while Geithner has started flacking for Obama’s budget on Capitol Hill. That keeps money on the sideline, since investors who have direct or indirect exposure to toxic assets still have no clear idea what resources they still have to put in play in the markets. The Obama administration keeps losing more credibility on its economic policy the longer it ignores the central problem of the collapse, and those put together have convinced investors to stay on the sidelines and protect whatever they have left.
When will a plan be forthcoming from the Obama administration? Unfortunately, it will probably have to wait until they get senior positions at Treasury staffed and up to speed — and as I reported earlier this week, Obama has sent a grand total of one nomination — out of 18 — to the Senate Finance Committee. That “next day” may well be “next year, despite Obama’s rhetoric about the economic collapse being his highest priority. Thus far, he’s been more interested in staffing his commission on women and girls than the Treasury.
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