So our new Treasury Secretary comes out after having plenty of time to work out some details, and what do we get?
More uncertainty. Just what the markets and the economy need.
There is a beast in the room, and nobody wants to move because they don't know which way the beast will run. The beast of course is the Federal Government, doing their best to avoid the laws of unintended consequences.
A few quotes from the Wall Street Journal's story are very illuminating:
"But critical details of the plan remained unanswered, despite the weeks of planning leading up to Tuesday's announcement."
"Mr. Geithner said the plan to stem foreclosures would be announced in coming weeks."
"He also provided few details of the asset-purchase plan, which is designed to be done in partnership with the private sector."
"The absence of detail speaks to the thorny issues that lie at the heart of the financial crisis: how to value the toxic assets causing banks to report losses and how to shuffle aid to homeowners and stem the rise of foreclosures."
OK, these are not new issues.
The Government has two choices: One, come up with a credible and specific plan to buy toxic assets from financial institutions and support the ones that become insolvent as a result of having to take losses on the sales. Or two, step aside, and let natural market forces restore equilibrium.
Right now, the Government is effectively blocking mutually beneficial trades from taking place. Who wants to argue that financial institutions are the natural holders of these risky mortgage assets right now, instead of private investors? They never should have had such a concentration in the first place, so let's get on with the business of transferring that risk to those who are most willing and able to bear it.
UPDATE: I have to add this additional quote from Geithner's actual speech; it is just so perfect: "We are exploring a range of different structures for this program, and will seek input from market participants and the public as we design it."
Beautiful. How about you have the President ask some of those poor folks in Elkhart Indiana who "have no idea what to do or who to turn to."