I didn’t get a chance to see Geithner’s press conference talking about the plan to stabilize the banks. But I understand that what was presented was an outline of a plan, with details to be provided as they work them out. (Now I see that they unveiled a new website today — still under construction — www.financialstability.gov.)
Fact Sheet on what they are calling: The Financial Stability Plan: Deploying our Full Arsenal to Attack the Credit Crisis on All Fronts.
OK.
A quick read of this says this to me:
- They basically get the overall problem — no one can tell the healthy (relatively) banks from the truly insolvent.
- They really don’t want to nationalize banks. Which is fine, but it isn’t clear to me how they resolve the essentially political question here: making the banks suffer for their sins while making sure taxpayers don’t take them over. There isn’t much recognition in either the political or pundit class that these two things are fundamentally in tension with each other.
- Certainly taxpayers are going to be exposed to even more downside here while trying to entice investors to buy up the toxic stuff. I understand this as a way to try to price these assets, but I’m thinking that Warren Buffet would have gotten way more in return for the majority of the risk.
- What is left just looks awfully tentative.
Basically, they get the problem and are trying to thread a political needle — minimizing risks to investors, minimizing costs to shareholders, increasing visibility to the books. To me, overall, a disappointment. Maybe it will get better in the details, which we’ll look at when they roll out.
What do you think? Make sure to read the Fact Sheet and tell me what jumps out at you, or — even better — what I might have gotten wrong about this.