Market Reacts to Geithner Plan...
So far, only the broad outlines are out, no details. The market isn't barfing all over what it sees, it is reacting more like it swallowed a hair.
UPDATE (11:10 am): Uh, now it is barfing...not a single mention of addressing mark to market accounting...barf...$1 trillion...barf...
UPPDATE: I said that Geithner needs to put in a heroic performance in order to salvage Obama's cabinet picking report card. Unfortunately, Geithner didn't clear the bar and it looks like Obama will get anywhere from an F to a C, depending on where your expectations were.
So why is the market barfing on Geithner's plan? Why isn't it. It's terrible. First, it's incredibly expensive. Second it doesn't appear to be aiming at the heart of the matter and the details are sketchy. Public-private partnership? Fine, but the details are important. No details. Do you think a hedge fund or private equity shop is going to take on the restrictions that the government has imposed elsewhere? No way, and this annoucement is chock-a-block with restrictions and accompanying populist rhetoric. Private capital might take a pass. Next up, regulators are going to get together to come up with better standards? Whoop-dee-doo. What's that gonna do? It might even be scary. And if banks don't meet the new stress tests, they will get a "capital buffer". What exactly is that? Is this the mark-to-market accounting reform that gave the markets some juice the other day? If it is, it is damn underwhelming. The rest of the plan is just more of the same stuff Bernanke has been doing, albeit with more populist restrictions/rhetoric and too much Barney Frank-type social engineering. I read an article somewhere today that made Geithner out to be a private enterprise hero by battling within the cabinet to hold the more heavy-handed big government types at bay in crafting the stability plan. Wow. If this plan is Geithner's heroic plan to save us from something worse cooked up by Obama's inner circle, we are in trouble.
This is not a financial stability plan, designed by central bankers for the banking system, at all. Rather it is closer to the typically stunted and misguided legislation that we always see coming out of the Great Sausage Factory. In fact it resembles the stimulus bill, that continues to reveal itself as the disaster that it is, despite the media's reluctance to offer any critical analysis of it.
UPPPDATE: Just for fun, let's round up the media coverage of the plan. Of course the most accurate headline would be "Markets Barf On Geithner's (Obama's) Plan" but you won't see that one. The WSJ comes the closest with "Details Scarce in Rescue Plan." CNBC focuses on Geithner's reaction to the reaction "Geithner Defends Plan, Says Fix Will Take Time" the barfing being implicit but unmentioned. At the NYT, CNN and MSNBC, you wouldn't know anything is awry at all with the plan. Reuters UK has it right, "Wall St. Tumbles on Bank Plan Misgivings."
UPDATE (11:10 am): Uh, now it is barfing...not a single mention of addressing mark to market accounting...barf...$1 trillion...barf...
UPPDATE: I said that Geithner needs to put in a heroic performance in order to salvage Obama's cabinet picking report card. Unfortunately, Geithner didn't clear the bar and it looks like Obama will get anywhere from an F to a C, depending on where your expectations were.
So why is the market barfing on Geithner's plan? Why isn't it. It's terrible. First, it's incredibly expensive. Second it doesn't appear to be aiming at the heart of the matter and the details are sketchy. Public-private partnership? Fine, but the details are important. No details. Do you think a hedge fund or private equity shop is going to take on the restrictions that the government has imposed elsewhere? No way, and this annoucement is chock-a-block with restrictions and accompanying populist rhetoric. Private capital might take a pass. Next up, regulators are going to get together to come up with better standards? Whoop-dee-doo. What's that gonna do? It might even be scary. And if banks don't meet the new stress tests, they will get a "capital buffer". What exactly is that? Is this the mark-to-market accounting reform that gave the markets some juice the other day? If it is, it is damn underwhelming. The rest of the plan is just more of the same stuff Bernanke has been doing, albeit with more populist restrictions/rhetoric and too much Barney Frank-type social engineering. I read an article somewhere today that made Geithner out to be a private enterprise hero by battling within the cabinet to hold the more heavy-handed big government types at bay in crafting the stability plan. Wow. If this plan is Geithner's heroic plan to save us from something worse cooked up by Obama's inner circle, we are in trouble.
This is not a financial stability plan, designed by central bankers for the banking system, at all. Rather it is closer to the typically stunted and misguided legislation that we always see coming out of the Great Sausage Factory. In fact it resembles the stimulus bill, that continues to reveal itself as the disaster that it is, despite the media's reluctance to offer any critical analysis of it.
UPPPDATE: Just for fun, let's round up the media coverage of the plan. Of course the most accurate headline would be "Markets Barf On Geithner's (Obama's) Plan" but you won't see that one. The WSJ comes the closest with "Details Scarce in Rescue Plan." CNBC focuses on Geithner's reaction to the reaction "Geithner Defends Plan, Says Fix Will Take Time" the barfing being implicit but unmentioned. At the NYT, CNN and MSNBC, you wouldn't know anything is awry at all with the plan. Reuters UK has it right, "Wall St. Tumbles on Bank Plan Misgivings."
posted by Donny Baseball at 10:42 AM
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