Geithner's Vagueness Explained

How could Geithner's much-vaunted financial rescue plan have been so stunningly vague on arrival, given the amount of time he'd worked on it? The Washington Post reveals that in fact he'd only been working seriously on it for less than a week: it's Plan B, and he only dropped Plan A at the last minute.

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.

Well, that explains quite a lot, I suppose. But the fact is that any Plan B, with details-to-be-ironed-out-later, is going to look better than any Plan A, with its plethora of devils in the details. And James Kwak has some detailed reasons why this particular Plan B doesn't look so hot.

Interestingly, one other big problem at Treasury is too few cooks rather than too many:

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.
Moreover, the department made a strategic decision to limit input from the financial industry and other outsiders, aiming to prevent leaks and avoid a perception they were designing the plan for the benefit of big banks. But that also meant they were unable to vet their plan with the companies involved or set realistic expectations of what would be announced.

It's a serious problem for America and the world that Treasury has basically done nothing since November 4, when Paulson lost his mandate and basically started doing as little as he possibly could. How long does it take to switch teams?

Comments

[No Free Cake:]

Oh great, thanks. I needed some cheering up.

(tongue firmly in cheek in case you can't see me)

Feb 17 10:29 AM

[Jake Berzon:]

"The department made a strategic decision to limit input from the financial industry and other outsiders, aiming to prevent leaks and avoid a perception they were designing the plan for the benefit of big banks," only because that is exactly what they are doing...

They are designing a plan to benefit big banks, but don't want "the people" to realize that until it is too late.

Feb 17 10:41 AM

[Nikola:]

I can see anyone feeling over their head in this situation in a position of Treasury Secretary.

But this sort of flailing is EXACTLY what the market does NOT need. You figure Geithner and Paulson would know this by now, if Obama can be excused.

I think we need to put GW Bush in T Secy seat. Sure he'd be waaaay over his head, but hasn't he just ran the country from that position for 8 years. And won a reelection. That guy can bullsh1t.

That's what we need.

Feb 17 10:41 AM

[Tim H.:]

What I am seeing is alot of rock throwing... Everyone has an opinion on what should be done and i have seen many different ideas with pros and cons. This just shows how screwed up and complicated the whole mess is... But warnings were there. When you buy a home and your mortgage contract ends up packaged with other securities and ends up in China somewhere. Something is F'd up. True story in USA Today. Some guy lost his job living in his home without payments for over a year in Fla (mid 6 fig price). Banks couldn't force him out because they could not produce his original mortgage. So Judge wouldn't foreclose. Guy said produce contract and I will leave. Just another example how screwed up things are... I am actually optimistic going forward. 2009 is gonna be rough. but I still have my job and holding on for better days ahead after 09.

Feb 17 11:00 AM

[MichaelJ007:]

Good. they need to take their time on this rather than rushing in an attempt to appease the media and markets. Paulson rushed in with a 3 page document and stuffed it down congress' throat. Roughly $350B in TARP funded so far and we're no better off. Let's try to get it right this time.

Feb 17 11:16 AM

[Pent up demand:]

Ah, yes, you see the original super secret plan that had been prepared just wouldn't work out. Right.

Why didn't he just say that the dog ate his homework?

Feb 17 11:18 AM

[Robert Perrego:]

How long does it take to switch teams? As your article said one objective is not to talk to Wall Street, or anyone else that knows what they are talkign about it seems.

Obama may be gunshy these days of nominating another tax cheat or lobbyist and once you rule out tax cheats, lobbyists and Wall Street professionals you pretty much have no one left that knows what they are doing when dealing with a WALL STREET PROBLEM.

Brilliant - I guess this is on the job training for Obama. No problem - there are no negative results, the market is just fine with our Neophyte in Chief at the Wheel.

Feb 17 11:19 AM

[Firefighter:]

Jssss… the guy just started ... how about giving him a chance. My guess is the guy is overwhelmed. The number one thing he has to do is build up his team. Expecting a total solution to a stinking mess like this in a few months is unrealistic. One group of people seems to want the guy to fail because they don’t like his boss. Another seems to think the universal solution to all problems is bankruptcy. Like people trained as lawyers know everything! A lot of politicians are trained as lawyers, and it seems the thing they do best is get elected.

The guys team came up with a solution, figured it would not work, and went back to the drawing broad. That tells me the guy is not a shoot from the hip kind of guy. He can recognize when a fix is not going to work. I am for the guys that TRY their best to solve a problem, knowing that maybe their first attempts will not work, but being flexible enough to keep on trying until they find a solution that actually works.

How long does it take to switch teams? You can’t switch teams until you have a replacement team built. I think a better question is how long will it take to come up with an approach to solve the problem? Well, that depends on how hard the problem is. Exactly what is accomplished by asking a question like – how long does it take to switch teams? It sure sounds like the author is trying to lead his comments to be negative from the get go.

Feb 17 12:30 PM

[NITRAM:]

Obviously you voted for Obama. Geithner has been involved with the original Tarp plan from day one. Paulson had Geithner in his pocket when he decided to only help his friends. After helping his friends, Paulson has not been seen. Maybe if he was available we could get a better handle on the Tarp. Obama appointed a tax cheat to Treasury. How can a man who cheated on the agency he now controls do his job with any intelligence or honesty? Geithner screwed up the New York FED, and will do the same to the Treasury

Feb 17 02:29 PM

[john s. gordon:]

well unlike the secret cheney energy task force of 2001 which was all oil barons, this time around the bank barons were excluded from the planning.
> jack

Feb 18 08:25 AM

[kelm:]

My take has been that they determined that the cleanest, quickest ways to fix the system couldn't be implemented - namely nationalizing the bans or then aggregator bank. Unfortunately the credit derivative mess creates a real tangle to unravel and the pricing gets complicated. The other issue is our financial system is so big can Washington realistic wade in and try and fix it in one big go (i.e. nationalization)? The answer is probably no. So while I can find a lot wrong with Geithner's speech, plan, nomination, and complicity in the crisis, I have to allow that we may have a problem that is too big to save by anything other than time and undramatic methods. That will drag the crisis out of course but it may be what we're stuck with.

It would be good if they came clean about what plan "A" had been.

Feb 18 10:57 AM