Sorry Geithner, The Market Is Not That into You

Includes: DIA, QQQ, SPY
by: Adrienne Gonzalez

Let's not be coy about how I feel - if you read me, you know I've never been too keen on our darling Treasury Secretary starting way back in his NY Fed days. Perhaps I didn't give him enough credit or held his IMF/Fed resume against him (grab the tin foil hats, kids, both institutions are dead set on the path to destruction), but when I heard he would be taking Hank Paulson's spot at the Treasury, I may have experienced a profound "I threw up in my mouth a little bit" moment. Not him. Please. Anyone but him.

Inauguration Day came and went, Geithner's tax drama took center stage and it seemed for a moment that he might be out - alas, the clean-up crew washed away the scandal and Geithner slithered his way into the Chief of Looting the American People spot with little fanfare. Timmy even took a pay cut in leaving the Federal Reserve - awwwwww isn't that precious? What a hero.

And while we all know that I love nothing more than snarking my way through the day's news and Geithner makes a wonderful target, I've realized over the last few weeks that I don't even need to waste my breath. The blogosphere, media, and Geithner's own bumbling do the work for me.

Case in point, this Barron's article calling Timmy's "TARP 2.0" speech a total dud:

THANKS FOR NOTHING, TIM. Your TARP 2.0 speech was even more vague than the valuation of collateralized debt obligations.

Following the Treasury Secretary's much-anticipated speech about the Obama administration's recovery plan, investors sold, sold and sold.

Anyone who watches stocks knows that. But deep in the options market, the trading took on an even more ominous feel, indicating that very big investors are once again very bearish. Many big positions were opened in expectation of even more bearish outcomes.

One investor sold 40,000 March 1000 calls on the Standard & Poor's 500 index. So long any hopes of a first-quarter rebound. The index was recently at about 826.

The Treasury secretary seems stuck on keeping the banks we have in place. But we don't need zombie banks overstuffed with nonperforming loans -- ask the Japanese.

The WSJ's Andy Kessler takes a deeper look at why the markets feel compelled to give Tim Geithner the cold shoulder (and frankly, I couldn't agree more):

One of the cool things about being Treasury Secretary is that you get your signature on dollar bills, giving them authority, defending their honor. Timothy Geithner's plan to save the struggling banking system probably does the opposite, throwing good money after bad to a banking system struggling under the weight of its own mistakes. The markets don't like it. The Dow dropped 382 points while bonds rallied as a port in a continuing storm.

Mr. Geithner announced a three-point plan yesterday to "clean up and strengthen the nation's banks," and made a vague declaration to use "the full resources of the government to help bring down mortgage payments and to help reduce mortgage interest rates." Unfortunately, those are conflicting plans. Hence the markets' skepticism.

So I'm sorry, Tim Geithner, but the market is just not that into you.

Can you really blame them? First of all look at yourself. You're a wreck. You, as Treasury Secretary, need to get up in front of those cameras and at least pretend that you know what in the high hell you are rambling about. Come on, you're from The Fed!! You know how Bernanke gets down. It may not make sense to anyone (even the economists) but at least it sounds right.

Mr. Geithner wants to "stress test" banks to see which are worth saving. The market already has. Despite over a trillion in assets, Citigroup is worth a meager $18 billion, Bank of America only $28 billion. The market has already figured out that the banks and their accountants haven't fessed up to bad loans and that their shareholders are toast.

Second, Mr. Geithner wants to use up to $1 trillion to back new car loans, home loans and student loans. That's noble, but incredibly market distorting. Who gets these loans? Will banks be forced to loan to those with bad credit? Who sets loan rates? Doesn't this just set up another credit squeeze when government guarantees are lifted?

What we need are healthy banks with clean balance sheets and enlightened risk assessment to provide consumer and business loans that will generate returns to shareholders. And to this end, Mr. Geithner wants to create a public-private partnership to buy toxic securities off bank balance sheets. This is a truly worthy goal, but I don't think his plan for doing so will work. Banks are more than able to sell these toxic loans today. They just don't like the price.

Dude, you're losing us. And I hate to break it to you, Mr. Geithner (actually, no I don't, someone's got to tell you this), now is not the time to stumble through a speech like a nervous 14 year old asking your crush's Dad if you can take her on a date. I understand it's got to be rough working under OMGObama and his incredible public speaking ability but for Christ's sake get it together!

Maybe you should take up smoking so you can master Paulson's Marlboro Man growl? Try that and let me know how that works. Just do something!