Wall Street had an overwhelmingly positive reaction Monday to Timothy Geithner's proposal to alleviate the toxic assets from troubled banks through a public-private partnership, with the Dow Jones Industrial Average jumping up nearly 500 points.
The movement upwards could not have come at a more opportune time for the Treasury Department, which has faced weeks of criticism for being too reactionary and timid in light of the economy's various plights. Geithner himself has come under attack for his response (described as tone-deaf) to executive compensation, made worse by revelations that he had pushed Sen. Chris Dodd to eliminate caps on bonuses paid out by bailout recipients in the stimulus.
Indeed, the Treasury Secretary, with repeated votes of confidence from the president, appears to be in the midst of a media blitz to reassert control over the political narrative: addressing roughly 100 reporters in a background meeting on Monday morning and giving an exclusive interview to CNBC in the afternoon. On Wednesday, Geithner will give a speech at the Council on Foreign Relations in New York City -- the heart of the financial lions' den. The next day, he will testify before legislators on Capitol Hill.
But the early, positive reaction may have obscured just how difficult and occasionally shaky a public relations task the Obama administration has at hand. The roll out of the Geithner plan was months in the making, White House aides say. The process was, as one official put it, "continuous and methodical," and it involved keeping ideologically disparate voices in the loop.
"We consistently reach out to brief Wall Street and business leaders on plans and our agenda," said another White House official. "And we did that this past weekend, but we have also done that consistently for the last few months."
Several Democratic officials, however, have expressed concern over how Treasury has handled itself two months into office. Much of the unease focused on a lack of staff in key departments, notably a paucity of key aide slots under Geithner. (On Monday night, the Obama administration announced the nomination of three deputies to serve under the Secretary). But there were specific issues as well. One well-connected strategist called it "remarkable" that Treasury left Dodd taking the brunt of criticism for inserting an exemption to the bonus restriction for bailed-out companies. Another Democrat strategist raised concerns that Treasury didn't lay sufficient groundwork to roll out Geithner's proposal, leaving the Secretary exposed to pointed criticism from a variety of progressive publications after the details were released this weekend.
"It surprised me because the communications team over there has many issues," said the strategist. "But one of their perceived strengths is that they are good planners."
That said, the plan has engendered positive reviews from both key and surprising constituencies. Wall Street approved by following suit with the biggest one-day gain in stock prices since October. On the political front, some GOP leaders offered support for the proposal, as reported by the Huffington Post's Ryan Grim.
And while liberal economists, notably Paul Krugman of the New York Times, took Geithner to task for a plan that he termed an "awful mess" that would create a "massive moral hazard," observers on the conservative side were more sympathetic.
"It is about time," said Thomas Howard, a business professor at the University of Denver, who endorsed John McCain during the election. "This is the path we were headed down last Spring when instead we started pumping money directly into banks. That decision was driven by the nefarious interplay of capital requirements and the mark to market rule which is now on its way out. So we got diverted. Now we are back to what we should have done a year ago and what worked so well during the '90-'91 recession and S&L crisis."
Added Diana Furchtgott-Roth, a senior fellow at the Hudson Institute, "It might be difficult getting private enterprise to invest in the plan, to come forward with assets to invest. But the idea of taking the toxic assets and transforming them somehow into toxic liabilities by taking them out of the bank and into public-private partnerships is an excellent one, which has been used successfully elsewhere."