In today's press conference, new Treasury Secretary Geithner talked tough. He even talked right. Indeed, he talked beef. America needs a full-blown bank rescue. It must devote a lot of money to stem losses in the housing market and limit new defaults. Geithner talked in the needed trillions of dollars.
But then the meat did not show up. Fine principles aside, what's the actual plan in real life? Geithner was short on the details and that was disturbing. Is there still infighting among advisers on how to proceed? The New York Times reported yesterday that Geithner won the internal debates. Sounded like a clever press plant to me.
Just a couple of issues:
One, Geithner says he will involve private capital in helping determine the price of toxic assets: the classic public-private partnership. An earlier idea about simply buying up toxic assets was criticized because the government does not know how to price them and may pay too much. Geithner says involving private capital will help determine a better price. But he plans to create incentives and guarantees to attract the private capital. How do you do that without making an implicit estimate of the value of those assets? It's simply a horse of a different color, I think. Pricing is still the issue. I await the details.
Two, I waited breathlessly for details about how to rescue housing. It is the toughest of problems and Geithner made clear it was the "most" critical. It is very had to get a handle on the issues because to bail out the bad mortgages means also bailing out lots of goods one at a high cost to government. So what's the plan? It will be rolled out over the next few weeks. Not few days but few weeks. In other words, it's not ready. More infighting? Bickering with Congressional leaders?
This administration is far more on top of the issues than the last one. They are working hard at doing the right things. They are talking serious money, which is required. But the details so far are skimpy and the value of the public-private partnership at this point hard to understand, except as an ideological political ploy.
The principles are encouraging. But the tale is in the details.