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February 11, 2009
Scary thought for the day: Obama and Geithner don't have a clue
Treasury Secretary Geithner had a moment in the sun yesterday after a big build up from his boss at his Monday night press conference.
Obama, you recall, didn't want to "steal any thunder" from his Treasury Secretary about the Bank Bail Out II. Turns out, neither Obama or Geithner apparently have a clue how to wipe the trillions of dollars in bad assets from the US Banking system. In fact, when briefing lawmakers, Geithner was nearly laughed out of the room:
Administration officials were greeted with sarcasm and laughter Monday night when they briefed lawmakers and congressional staff on Treasury Secretary Tim Geithner's new financial-sector bailout project, according to people who were in the room.
The laughter was at its height when Obama officials explained that the White House planned to guarantee a wide swath of toxic assets -- which they referred to as "legacy assets" -- but wouldn't be asking Congress for money. Rep. Brad Sherman (D-CA), a bailout opponent in the fall, asked the officials to give Congress the total dollar figure for which they were on the hook. The officials said that they couldn't provide a number, a response met by chuckling that was bipartisan, but tilted toward the GOP side. By guaranteeing the assets, Geithner hopes he can persuade the private sector to purchase a portion of them.
Earlier, Geithner laid out the "plan" in a speech. What horrified experts was that all Geithner could come up with were generalities with a promise to fill in the details "at a later date."
No one knows how much it will cost. No one knows how it will work. And no one knows if Obama and Geithner aren't just making things up as they go along, stalling for time until they can come up with ideas on how to solve the crisis.
Stocks responded to the overwhelming negative reaction by experts and tanked 4.6%. The consensus is that they either don't know what they're doing or they just don't have a clue about how to recapitalize the banks. There are enormous fears that the US banking system is tottering, on the edge of disaster. Some experts believe that the net worth of US banks is less than zero. And until these toxic assets are bought by someone - private investors or the government - no one knows how bad the problem really is.
And until someone does, the banks are going to continue to be reluctant to lend money.
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