Financial Crisis Watch: Where's Timothy?

There’s been a good amount of speculation in the press as to whether the market’s sharp decline is a judgement on the policies of the new administration. While there are a number of factors at work, I think it is fair to say that the market’s decline is largely reflecting, not so much the proposed policies (which will generate both winners and losers in the stock market), but rather the lack of policies for a resolution of the banking system crisis. Without a clean-up of the banking system’s balance sheet, there is little hope of a sustainable and robust recovery.

Treasury Secretary Timothy Geithner has been noticeably absent over the past few weeks. After his weak launch last month, it may well be that the administration feels he shouldn’t be put in the spotlight until a “bullet-proof” set of policy remedies can be put on the table. However, various news reports suggest that Treasury is not even close to a clear strategy. There is also a growing fear that the Administration is not sufficiently focused on repairing the financial sector. Instead, it appears to be moving on to the many wide-ranging initiatives recently announced by the President.

This is a particularly frustrating time for investors. Given a lack of a clear banking plan, the markets will have great trouble sustaining an advance, and the bias may well continue to be lower. However, early indicators (another improved reading on the ISM survey, the Baltic Dry Freight Index holdings its gains, etc.) point to an economy that’s trying to find some footing. This suggests that the announcement of any reasonable strategy for repairing the banks could help the market enormously. For investors, this puts the ball squarely in Secretary Geithner’s court. Where’s Timothy?

Comments

[Lightway:]

To keep things in perspective, the administration has barely been in office for over a month. It usually takes more time to even get a team in place, much less formulate an initial plan. To have the actual details hammered out by this time would be both rushed and an unrealistic expectation. Obama's team is way ahead of the curve in addressing the problem, which is alot better than their predecessors, who spent 7 years and 3 months trying to figure out where the bathroom was.

Mar 03 02:01 PM

[Bocaboym22:]

SO since he hasnt been in office that long maybe he should feel it out before spending us into socialism . . .and for those who say we need it, then I ask why the spending is backloaded into the bill. "HOPE IS (NOT) ON THE WAY" as Kerry would say. I agree Obama inherited a problem, but the solution is not a fast train from disney to Vegas. I guess his bridge to no-where is actually a train. I sure hope my children are ten times more successful than me to pay for this INCREDIBLE spending package. Perhaps the first law that should be signed is to stop allowing the governemt to spend money we and they do not have. THE BUCK STOPS HERE IF WE CANT AFFORD IT DONT BUY IT! GOVERNMENT MONEY IS OUR MONEY. They fly around in private jets paid for by us, and the only profit they generate is by raising taxes. We have a deficit, how many senators are giving up their private planes? The unemployment rate is going up, but GOVERNMENT IS hiring with our money. Doesnt that seem wrong. One positive thing about his policy, I am really glad he stopped those rich folks from giving money to charity HAHA. By the way that is a bit or irony for you people without a sense of humor.

Mar 03 02:24 PM

[stopwhining:]

It's unreal the amount of bitching and moaning coming from Wall St. these days. Debt is nothing more than energy borrowed from the future. The velocity of money worked to the benefit of the rich and their financiers for many decades, now they are complaining like spoiled 2 yr olds after having lost their favorite toy. What they do not realize is that the illusion of wealth created by the debt bubble was just than, an illusion. Credibility is the only true currency is this world and we have been borrowing from ours for a long time. Now that credibility is in jeopardy and if we're not careful, it will be lost forever. The rich don't care, by the time the rest of the world figures out that the US has gone BK, they'll have moved all of their money overseas, and the poor will get f@cked once again as the dollar becomes worthless.

Mar 03 02:27 PM

[Tesa:]

Jeffrey Korzenik, of course you are not telling the truth. This video was produced less than a week ago. It wasn't hard for me to find Timothy. I wonder why you couldn't find him.


www.pbs.org/newshour/v...
'
Your post must have a politically motivated..

Mar 03 02:27 PM

[Bocaboym22:]

6 Comments It's unreal the amount of bitching and moaning coming from Wall St. these days. Debt is nothing more than energy borrowed from the future. The velocity of money worked to the benefit of the rich and their financiers for many decades, now they are complaining like spoiled 2 yr olds after having lost their favorite toy. What they do not realize is that the illusion of wealth created by the debt bubble was just than, an illusion. Credibility is the only true currency is this world and we have been borrowing from ours for a long time. Now that credibility is in jeopardy and if we're not careful, it will be lost forever. The rich don't care, by the time the rest of the world figures out that the US has gone BK, they'll have moved all of their money overseas, and the poor will get f@cked once again as the dollar becomes worthless.


NOT TO MANY RICH PEOPLE QUALIFY UNDER SUBPRIME!

Mar 03 02:46 PM

[Larrysyr:]

The market is reacting to horrific fundamentals. No plan is going to change those. Our big bubble burst, and this decline is the price.

The Obama administration is not whipsawing us with daily contradictions. I have a hunch they don't have a plan much beyond what has already been announced. They won't nationalize the banks, and they will not let banks the size of Citi or BAC go out of business. Nor will they let that happen to AIG. And they're going to try to cushion the downturn with spending, tax cuts, and assistance to unemployed folks.

For six weeks, I'd say it's not too bad. If we're still having this conversation in six months, I might have a different opinion.

Mar 03 02:54 PM

[carpe_diem:]

Jeff
i agree with you. it's extremely difficult to put any trust in Tim Geithner yet.
i sort of miss Henry Paulson. At least we could see him more often and hear what he was trying to do!

Mar 03 03:02 PM

[Tesa:]

Bocaboym22, even well qualified people have paid sub prime.

"Columbia Journalism Review's Dean Starkman and Ryan Chittum have made the point over and over again that much subprime lending was simply fraudulent. People who should have qualified for prime loans were given more expensive subprime ones instead, because it was more lucrative for the mortgage brokers, lenders, and Wall Street firms."

www.slate.com/id/22124.../

Mar 03 03:21 PM

[who:]

Obama needs to take some heat by making too much pre-announcement fan fair from Tim. More should have been done to manage expectations if no concrete plan was going to be put forward.

Mar 03 03:28 PM

[Bocaboym22:]

Tesa I thank you for the article.

I dont disagree that brokers were at fault. I have average intelligence (I hope) and at 22 (9years ago) I wanted to buy a car and they quoted me 17% interest rate. I knew this was much more then my credit card rate. You know what I did - i walked out of the dealership. When people realized the rate was too high they should have walked out. And for people who fell for teaser rates, they should have realized, too good to be true is. And I think that the companies and banks should be left with both the loses and the properties. I agree in a man's word and a deal. If a bank signed the loan they are responsible to take the property back if the loan is not paid. I have spent my life living in rented apartments because I could not afford to buy a house. But guess what, now I am buying many. Wonder when Nancy and Obama will let me move in to all those houses me and my future kids are buying.

Mar 03 03:51 PM

[Paul_L:]

Did Closet Geithner provide any details today? HOPE his speech will not cause another 15% drop in the market although market dropped after his speech according to Bespoke. I thought he was the NY Fed head and was involved with all the financial problems in the past year and he was PICKED as the man. It is really no excuse. I suppose we all can wait for his massive force to do right while we watch retirements and so forth continue to descend and financials going to zeros. The market needs HOPE.

Mar 03 05:40 PM

[MattZN:]

Who is more at fault, Obama for not producing a miracle or the media for not bothering to even read the financials filed with the SEC before coming up with their next headline?

The answer seems fairly obvious to me. This media-fueled frenzy has done far more harm to the financial crisis then any action taken by the government. From stupendously idiotic statements that make people believe banks were supposed to use TARP money to lend more when they clearly were never designed to do any such thing, to an assumption that the American people are too stupid to understand the cascading effect of a derivative defaults that the government is trying to prevent. If you want to point fingers, don't point them at Obama. Point them at all the pundits who can't be bothered to spend more then 5 minutes researching a topic before they open their big mouths.

-Matt

Mar 03 07:48 PM

[Tony Petroski:]

I'm not blaming Obama for not turning things around 6 weeks into his term (hopefully his only term), but let's stop pretending "hope and change" is a policy.

Mar 03 08:17 PM

[Paul_L:]

Since Geithner spoke on 2/9, amazingly 17 days of market decline.

Mar 03 08:45 PM

[InnocentsAb...:]

I'm beginning to think more and more Obama in the financial world looks like LBJ in Vietnam. He inherited a disaster, but he can't pull himself away from the purveyors of what looks to him like a Camelot, the bright shining heroes of the New York markets.

More important, it is a sign of fundamental weakness on his part, that he is shielding the forces that were most opposed to his candidacy. He is unable to use his political leverage to dismantle the busted corporations.

Still, all things come to an end. He knows he has to p__ or get off the pot.

I predict within 24 months.

Mar 03 09:28 PM

[Tesa:]

Bocaboym22, if people could not be outsmarted and deceived then institution fraud would not take off. To expect deceit proof population to battle multiple banks that were on this gravy train is rather naive.

I suggest you read this article to understand the scale of fraud people had to deal with.
www.cjr.org/the_audit/...

Mar 03 10:43 PM

[Moon Kil Woong:]

We should quit thinking about how to help the banking sector and more on how to fix it. The easiest fix, but short term most painful is bankruptcy. The less palatable is nationalization, but it lets the losses be unwound slowly without disclosing the immediate effects so quickly. Other fixes include passing legislation forcing banks to separate out their brokerage and other businesses like Glass-Stegall, barring them from further derivatives, requiring all new derivatives to become exchange compliant or be void, require all off balance sheet accounting to be fully accounted for by 2011.

Mar 04 12:17 AM

[monday1929:]

Thank you. There is an organized campaign to place the blame for this on the "poor". The VASt majority of the blame, and the criminal resposibility, should be on the Bankers, Ratings agencies and "regulators" who looted trillions from the economy. The greedy flippers etc could not have dug themselves into the hole they did without some very well paid people looking the other way, for a price.


On Mar 03 03:21 PM Tesa wrote:

> Bocaboym22, even well qualified people have paid sub prime.
>
> "Columbia Journalism Review's Dean Starkman and Ryan Chittum have
> made the point over and over again that much subprime lending was
> simply fraudulent. People who should have qualified for prime loans
> were given more expensive subprime ones instead, because it was more
> lucrative for the mortgage brokers, lenders, and Wall Street firms."
>
>
> www.slate.com/id/22124.../

Mar 04 01:07 PM

[monday1929:]

A question? If the policies of either Bush or Obama are the cause of this crash, why does the chart look like the chart that has followed EVERY credit bubble in history? A parabolic rise followed by a clear 5 waves down?
No doubt some policies may make things less bad or more bad, and certainly we should feed those left hungry by the Bankers derivative tools of financial terrorism, but a CRASH is a crash is a crash. And after a monster rally at some point soon, which Obama's supporters will give those same policies credit for (and I did vote for Obama- think he is the Best man for this near hopeless job), the CRASH will resume, again, no matter what particular policies are put into place in the meanwhile. EVERY credit bubble collapses, and this was the largest credit bubble in history. Let's hope Americans can work together and be prepared to fight the forces for War which develop out of the bottom of social mood seen at the nadir of large "C" waves- WW1, Civil War are two examples Robert Prechter has pointed out.

Mar 04 01:17 PM

[monday1929:]

You make good points. I believe Obama has the intelligence, sense of History and strong desire to preserve a world worth living in for his two daughters to toss out the morally bankrupt and just plain wrong Geithner, Bernanke, Rubenron et al.


On Mar 03 09:28 PM InnocentsAbroad wrote:

> I'm beginning to think more and more Obama in the financial world
> looks like LBJ in Vietnam. He inherited a disaster, but he can't
> pull himself away from the purveyors of what looks to him like a
> Camelot, the bright shining heroes of the New York markets.
>
> More important, it is a sign of fundamental weakness on his part,
> that he is shielding the forces that were most opposed to his candidacy.
> He is unable to use his political leverage to dismantle the busted
> corporations.
>
> Still, all things come to an end. He knows he has to p__ or get off
> the pot.
>
> I predict within 24 months.

Mar 04 01:24 PM