The market lost 382 points today after Timothy Geithner, Treasury Secretary, offered his much anticipated plan for the banks. Yet, the promise of details was sorely forgotten and the plan was filled with more of the same rhetoric and few specific details. Essentially, the government plans to use up to $2 trillion in private and public capital to stabilize the credit markets. But, rather than providing clarity, the government has made our financial future look as uncertain as ever. Geithner even admitted that he is still “exploring a range of different structures” for the bailing out the banks.
Mr. Geithner said the Treasury was creating a public-private investment fund, jointly run with the Federal Reserve with financing from private investors, to buy up hard-to-sell assets that have bogged down banks and financial institutions for the past year. He said the new fund, often described as a “bad bank” for holding toxic assets, would start with $500 billion, with a goal of eventually buying up to $1 trillion in assets. (New York Times)
Far from specific and detailed this seems to be the same old, make-it-up-as-you-go-style Treasury plan. The market, which had rallied strongly in anticipation of a concrete plan, sold off hard breaking back through the 8,000 level on the Dow once again. The Senate's passage of the $838 billion stimulus plan failed to provide any lift to the market. Today was devastating to the bulls and our hopes of some upside are crushed for the short-term. Please someone teach government officials that they must do what all good companies do: under promise and over deliver, not the other way around. Failing to deliver details knocked the market back to lows.
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