There’s been no absence of criticism leveled against Treasury Secretary Tim Geithner and the rest of the White House economic team after their Wall Street bailout strategy, unveiled last week, came up short on details and sent the Dow tumbling nearly five percent.
Today, The Washington Post today lends a nice glimpse into the reasons why that plan was so vague, reporting that Geithner & Co., after spending weeks crafting one plan, changed course at the last moment after deciding their initial strategy was too expensive and too risky. “There was one problem,” The Post reported. “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.
Under the revamped Geithner plan, the Troubled Asset Relief Program would once again merit its name, combining public funds with private investments to rid the banks of their toxic assets and get them lending again. But, according to The Post, there remained too many unknowns last week to unveil their strategy in any detail. For example, federal officials were unsure how much federal funding the plan would require; where the cash would come from; and how the government would lure private investment into toxic securities, many of which are backed by fraudulent mortgages of questionable value.
In the end, Geithner and his colleagues decided that it would be better to take flak for being vague than publicly offer half-formed details that might later have to be revised.
That might prove a prudent course. But it still doesn’t explain why Geithner — who had been been the lead regulator of New York’s banks for the last five years, not to mention one of the central architects of the Bush administration’s Wall Street bailout — didn’t have a clearer idea of a solution, even as recently as last week.
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