So much has been written about the bank rescue announcement by Treasury Secretary Tim Geithner, and a clear verdict in the court of conventional wisdom has set in - the details were missing and the plan was far too scant to soothe the markets.
The strength or weakness of the Obama plan shouldn't be measured in terms of the day-to-day nerves of investors. I think there are three measures that make more sense: (1) in the short term, does the public at large think that this administration has learned from the mistakes of the Bush administration; (2) also in the short term, does the public at large think that this administration knows what it is doing and has a specific way forward that will work; and (3) in the long term, did the plan work?
On the first point, like so many actions of the Bush administration, the lust for secrecy outweighed good policy and common sense. In the TARP program, the Bush administration was, in large part, granted unilateral authority to spend taxpayer dollars in secret. This predictably led to lurching and erratic decision-making by administration officials, of which we were only afforded glimpses through enterprising journalists, and reckless and unaccountable spending by financial institutions on corporate boondoggles and executive payoffs.
I think Tim Geithner gets that. To me, he conveyed a sense that he knows the public will no longer stand for its money being spent this way, and that elected representatives in Congress will not tolerate being left in the dark with so much at stake.
On the second point, unfortunately Mr. Geithner undermined the good job he did in advocating transparency by failing to provide enough himself. From what I can tell, that has led to an unfortunate consequence: a growing belief that either the administration, like the last one, thinks the public cannot be trusted to know the details or that the administration simply does not know the details itself.
Unfortunately, reporting indicates that it is the latter. We read today about infighting in the administration over the details of the plan. Reportedly, this infighting has not been resolved. Consequently, there are no details provided to us because they have yet to be determined.
As for the third, and most critical point - did the plan work - we don't yet have enough information to make a judgment. I do have a concern that this plan may end up being overly cautious and continue us down the path of bailing out the wealthiest among us, without demanding full accountability of the Wall Street tycoons. I hope that the new administration insists on real and meaningful pay caps and transparency while insuring that taxpayers are protected and credit flows to deserving borrowers.
Getting out of the hole that the Bush administration has put us into will require the reality of an improvement in economic conditions - in unemployment, in the availability of credit, in improved wages, and the halting of foreclosures and plummenting property values. But we also will need the American people to perceive that the economy has improved. This crisis of confidence that has set in will not be fixed by vague messages from the administration.
There is so much anxiety out there based on the reality of the most dismal economic conditions since the Great Depression. The public needs to know that the administration is confident enough in the way forward to expose its plans to scrutiny. Only then, can we start to feel hopeful again.
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