Why Geithner’s Bank Fix Will Fail
By Barry Ritholtz - February 20th, 2009, 9:15AM
Treasury Secretary Tim Geithner released his desperately awaited banking-system fix last week…and the market immediately dropped several hundred points.
Why? Because the plan lacked what the market needs most right now: clarity. And, says our guest Chris Whalen of Institutional Risk Analytics, because it is just another half-measure that will attempt to prop up zombie banks and preserve the status quo.
Even as Geithner puts the finishing touches on his new hybrid public-private rescue, Whalen thinks the idea is doomed. But, he says, Geithner needs to do something, soon, or the stock market will continue to collapse.
Yahoo Tech Ticker, Feb 17, 2009
February 20th, 2009 at 9:24 am
“Even as Geithner puts the finishing touches on his new hybrid public-private rescue, Whalen thinks the idea is doomed. But, he says, Geithner needs to do something, soon, or the stock market will continue to collapse.”
Hmmmm….it is doomed, but do it anyway?
Ready, fire, aim….?
If you do something that is doomed to fail, won’t the stock market collapse anyway?
Hmmmm…..
February 20th, 2009 at 10:03 am
“the market immediately dropped several hundred points….Why? Because the plan lacked what the market needs most right now: clarity.”
Beg to differ. I think the market dropped because Wall Street realized they weren’t going to get a fresh infusion of billions of taxpayer dollars with no strings attached.
The reason it didn’t drop further was because there wasn’t clarity. Once it becomes clear Obama will nationalize (or take into receivership or whatever word we’re using now) some major banks, expect the market to fall like a stone as a bunch of shareholders panic once they realize they’re going to get liquidated. It’ll come back, of course, as the plan actually works and the banks left standing and the system itself is are stronger.
February 20th, 2009 at 12:22 pm
“Beg to differ. I think the market dropped because Wall Street realized they weren’t going to get a fresh infusion of billions of taxpayer dollars with no strings attached. ”
Spot on.
That said, Timmy’s plan still sucks.
February 20th, 2009 at 2:00 pm
Timmy’s plan still sucks.
As explained, you’re definitely right. I still have no idea what the hell it is.
But since it’s becoming increasingly clear that they were deliberately obfuscating their in order to keep the markets from going mental and to win political cover to have a nationalization option, I think we’re going to start seeing pretty soon what their plan really was.
BTW, I’m putting down my marker and predicting a market bottom in the next 1-3 weeks.
Once people see nationalization as an eventuality and understand its consequences, the freakout will be massive, and people will shed everything just because they’re freaked. This will be the big move downwards that will mark the bottom. Its exact depth will depend on whether the Obama administration needs the market to not collapse in order to fix the finance sector (the willingness of private capital to jump in and back the feds’ move when they take over zombie banks will probably be the biggest factor here), and on how well they pull it off if they decide to calm the markets.
February 21st, 2009 at 5:58 am
Why would these folks know what to do? And while they lounge about, Obama sends more troops to Afghanistan. Maybe the government will give Wall Street the Poppy Consession.