Geithner unimpressive at $3tr bailout launch

Wednesday, February 11. US Treasury Secretary Timothy Geithner yesterday announced the provision of a possible further $3 trillion bail-out funds for the American economy. Unfortunately for Geithner, his plans were so confusing that even experienced economic commentators were left to furrow their brows and lament the fact that the new custodian of the American economy is not as gifted a public speaker as his boss, Barack Obama.

Testifying before Congress, Geithner (pictured) said the plans were designed "to be comprehensive and forceful. There is more risk and greater cost in gradualism than there is in aggressive action," he said. "This strategy will cost money, it will involve risk and it will take time." Immediately after Geithner finished speaking the Dow Jones index lost 4.62 per cent of its value due to traders worrying that the announcements did not include enough specific detail. Or perhaps Wall Street was simply unable to make sense of what details there were.

Writing for Salon, Andrew Leonard says the adverse reaction on the trading floors was a good thing. "If Wall Street had reacted with glee to Geithner's speech, then the rest of us might have more reason to be discouraged," he says, "because the obvious implication would have been that the government was delivering another no-strings-attached bail-out at the taxpayer's expense."

Writing for the New York Times, Paul Krugman is confused. "The plan deserves praise for what isn't in it, at least as far as I can tell. There doesn't seem to be provision for mass purchases of toxic waste at premium prices; there also doesn't seem to be a massive 'ring-fencing' guarantee against private losses on bad assets. In that sense, the plan is better than what the last few weeks of leaks led us to expect," he says.

"So what is the plan? I really don't know, at least based on what [Geithner said yesterday]. But maybe, maybe, it's a Trojan horse that smuggles the right policy into place."

A host of pundits gathered on Politico to give their reactions to Geithner's speech. Jeffrey Stewart thinks Geithner blew his big chance. "First, his demeanor is all wrong. He has a habit of looking up when his head is pointed down, which gives him the look of being either a graduate student who doesn't know the answer to a question or a guy who has stolen something and now is being asked about it," says Stewart. "Second, the timing of his speech was wrong. Obama should have left this whole week to the stimulus bill, the passage of it, the signing of it, the giving himself credit for it, before rolling out this larger problem."

Craig Shirley was equally unimpressed. "Geithner gave new meaning to the phrase, 'deer in the headlights'," he says. "I watched what was essentially a nervous and ill-prepared little boy testify before Congress and wondered what Washington tour he'd wandered away from."

Writing for the Guardian, Michael Tomasky says that while he didn't expect Geithner to wave a magic wand and make everything ok, he has obviously benefited from "a protective carapace of presumed authority and brilliance back when Obama nominated him".

"Every administration has one clunker," says Tomasky. "Geithner will have opportunities to fix the mess he made yesterday, so we'll see what kind of learner he is."

Since Obama won the US election in November, the US economy has witnessed unprecedented government intervention. First came the Obama-suggested, Bush-implemented $700bn banking bail-out, half of which has been spent and half of which is still to be released. Second came the $838 economic stimulus plan designed to kick-start the economy, which narrowly scraped through Senate last night. Geithner's proposed bail-out represents a third massive financial injection.

FIRST POSTED FEBRUARY 11, 2009