Waiting For Geithner

Here is some reporting on Geithner's bank bailout plan [which the markets are fearing and loathing]:

The Politico, by Mike Allen (with more here):

Geithner, who speaks at 11 a.m. in the Cash Room of the Treasury Department, does not ask Congress for any new money for the program, although Obama left that possibility open during his prime-time news conference Monday.

“The battle for economic recovery must be fought on two fronts,” Geithner says. “We have to both jumpstart job creation and private investment, and we must get credit flowing again to businesses and families.”

Geithener is unveiling a new bank-rescue architecture that includes: 1) a public-private investment fund to rid banks of toxic assets; 2) a new prerequisite for government aid: a stress test to determine whether banks can withstand the tougher economic climate, matched with a capital buffer from the government if they can't (the buffer comes with tough conditions); 3) and a major expansion of a consumer/business lending program to get secondary markets working (which accounts for 40 percent of all lending), lowering the cost of sound borrowing and freeing up markets.

An administration official explains: “The capital buffer banks gives the confidence they can survive under worsened economic conditions, so they'll stop hoarding capital now because they are afraid of taking risk. Also gets ahead of the crisis — will make sure consumers are protected. As part of the stress test, all bank regulators will go into largest banks to give scrub of the balance sheet, and make reporting uniform and consistent so people have a true sense of value in the market. Will increase confidence, and help attract private capital.”

Bloomberg, by Rebecca Christie and Julianna Goldman.

CNBC by Albert Bozzo, with a special plan overview.  I especially like this use of financial leverage to end-run the Congressional appropriations process:

2.  To revitalize lending and increase much-needed credit flowing to consumers and businesses, Treasury and the Fed are creating a new consumer business lending initiative to leverage up to $1 trillion dollars to kick start the secondary lending markets, which will bring down borrowing costs for responsible borrowers and help get credit flowing again.

If I understand this, Treasury is leveraging up the funds appropriated by Congress by using a portion of its remaining $350 billion as the equity slice of a new investment fund.  The Fed then deems the entity to be creditworthy and lends at some hopefully-plausible ratio - let's say 9-1 for illustrative purposes.

In that instance, Geithner puts $100 billion of the funds appropriated under TARP into the vehicle; the Fed lends another $900 billion; and the new vehicle rolls out $1 trillion in new loans. OK, why not have the Fed do this directly on their own balance sheet as lender of last resort?  Well, this mechanism lets Treasury staff it and call the shots, since they are nominally the equity investor here.  And I suppose that even a lender of last resort likes to get repaid, and may have reservations about the probable loan quality of the program.

Or I could be utterly mis-reading this.

The Treasury website press office is here.  Nothing official looking has come out yet - so far, the only entry for Feb 10 is a photo.  [Ahh - here we go.]

MARKET REAX:  The Dow fell about 180 points to 8010 after the 11 AM release of whatever was released; the Financial Sector SPDR was also down, falling roughly 3% from 9.75 to about 9.45 in the half-hour after the news.

[END OF THREAD]

Comments

[Rick Ballard]

"The Dow fell about 180 points to 8010 after the 11 AM release of whatever was released"

Gosh, it's almost like the market figured out that Treasury holding the reins means that TurboTimmy will decide who lives and dies. For the "common good", of course.

This is "Kill Granny" for the market. Better get those Democrat donations in the mail today if you want to survive.

[bad]

The market is down nearly 300 pts at this moment.

[Old Lurker]

Another -100 now, Rick

[Paul Zrimsek]

2) a new prerequisite for government aid: a stress test to determine whether banks can withstand the tougher economic climate, matched with a capital buffer from the government if they can't

Why am I suddenly afraid that the banks can smell my spicy brains?

[clarice]

Whoa--just cause he's a lying tax chiseler is no reason not to have faith in his who shall live and who shall die decisions. Let this be inscribed in the book of life-

[Rick Ballard]

Bad,

Taking on debt in the "private market" is going to get very expensive. If a company does not wish to take advantage of the government's "helping hand" then they have to reduce dependence upon debt by limiting growth to what can be achieved through increases in retained earnings.

The bestest way in the world to increase retained earnings quickly is by ruthlessly eliminating those employees not directly contributing to the bottom line. Those jobs can always be added back in (or not - hiring women is getting pretty dangerous) once retained earnings are increasing at a decent clip. It shouldn't take more than 5-10 years to get back to 2008 employment levels.

[bad]

That does seem like discrimination. I'm very ashamed.

[Fresh Air]

"...to give scrub of the balance sheet..."

I didn't know we employed any Chinese in the Treasury department.

[bad]

O is trashing the economy in Florida now.

there he goes, "save or create"

[hit and run]

Rick:
Better get those Democrat donations in the mail today if you want to survive.

I donated to Obama anonymously using prepaid debit cards in order to skirt the contribution limits, thanks to his ingenious use of online technology.

He'll believe me, won't he?

[bad]

Thanks for that encouragement Rick!! I feel so much better about the children's future now.

[Danube of Thought]

Note that Specter is now pretending to talk tough about the final version of the bill--he'll vote against it if this, that or the other blah blah blah. His only chance to stop this monstrosity was to vote no on cloture, and he didn't. So now we'll get the sham "no" vote on the bill as it passes into law.

As I said, I'll be sending money to whatever Republican challenges him in 2010.

[bad]

O just said he was going to provide states with basic relief. My mom just reminded me that welfare was called "relief" when she was a kid.

At least he's being honest in that moment.

[narciso]

You beat me to it, Clarice, a 'fraud sold by a tax cheat, proposed by a charlatan' why
would anyone have any confidence issues, with prospects of people investing real money. Transparency, my. . .

[kim]

Back in the day, welfare was also referred to as 'being on the county', and was a source of shame to some. How quaint.
==================================

[Old Lurker]

Has The First Federated Bank of St. Jane been chartered on the Island yet?

[glasater]

Power Lunch pundits on CNBC are just having a cow over Geithner's speech.

Rick Santelli--the bond guy at CME-says this is a price fix.

[ben]

I guess the market is not excited by a trillion in pork.

[Rick Ballard]

"Has The First Federated Bank of St. Jane been chartered on the Island yet?"

Certainly. The charter is available for inspection (for a nominal fee) at the bank offices. Just ask any croupier cashier for directions to my office. We're offering special rates this week to customers opening accounts by deposit of bearer bonds and/or cash.

Always remember the First Federated motto - "we treat our customers money as if it were our very own".

[bad]

lol rick

[Danube of Thought]

Just sent Specter a vitriolic e-mail, pledging to give financial support to his primary opponent in 2010. Had to make up a fictional PA address to do it. So sue me.

[narciso]

Mark Steyn, reminds some 'conservatives', of their flawed fling with Obama in the fall, note the quote marks. Where is Ken Adelman anyways. DeMille's "Gatehouse" is
a great read by the way.

[bad]

Drudge has a headline saying stealth bill will drop restrictions on travel to Cuba.

[glasater]

One guy on CNBC anticipates that the S&P could go down to 600.

[PDinDetroit]

So, the senate passes the Spendulus Bill. Does anyone have the vote listing (who voted which way)?

[bunky]

The market loves it!!!!!!

[MayBee]

Andrea Mitchell said the Hedge Fund Managers- "the smart guys" want to wait to see if the regulations will be enough.

It seems like only Friday we were told the markets were going to go up on the news of the passage of the stimulus bill.

[Old Lurker]

"One guy on CNBC anticipates that the S&P could go down to 600."

The world is divided between optimists and pessimists.

Optimists think the bottom was 825 S&P, 8000 Dow, and that in the usual fashion the ball will bounce along those levels before heading back up. (I keep thinking of Steve McQueen bouncing that ball in his cell...)

Pessimists are further subdivided into two camps:

Light Pessimists think the real bottom is 10% lower (750 & 7250).

Heavy Pessimists think that real bottom is 25%-33% lower (600 & 5000).

The gold in the well and bullets on the porch crowd think the Heavy Pessimists are smoking dope.

[Danube of Thought]

I think it's safe to say Geithner laid an egg.

Meantime, the Obama administration frets: can we prosecute terrorists who weren't read their Miranda rights? You think I'm kidding, go to the LUN.

[pagar]

Drudge has a headline saying stealth bill will drop restrictions on travel to Cuba.

They could put anything they wanted in that stealth bill. There isn't a soul in the world who could claim to have read it and understand it.

Bad, I noted earlier today that the Long sentence that was posted from the bill has wording that all appropriations in the paragraph cited had to be completed in 7 days from the date of the bill(or words to that effect). I would not be surprised to learn that there are immediate deadlines on any of the actions in that bill. The leftists have been working on their dream package for years, and this is their dream package, IMO.

[MayBee]

Andrea Mitchell assures me it was too much to expect for Geithner to have a full plan right now. He's only been in office 3 weeks.

[Ignatz Ratzkywatzky]

He's only been in office 3 weeks.

Yeah, and he's only been the president of the NY Fed reserve since 2003. How could we possibly expect him to have a clue after a mere six years?

[Rick Ballard]

"He's only been in office 3 weeks."

He's probably had to spend some time on his taxes as well. They're due in two months and he has a lot of forgetting to do.

[Jane]

DOt,

Did you read Kerry's piece on the necessity of winning the war this morning? I don't recall where I saw it but I'll look if you are interested.

[Fresh Air]

...necessity of winning the war...

Against Republicans, you mean?

[daveinboca]

a public-private investment fund to rid banks of toxic assets used to be called the Resolution Trust Corp unless this is something different. Otherwise, banks will not lend with the toxic assets the Carter/Clinton mob created by making FannieMae/Mac the repository of bad mortgages forced on banks by threats. Barney Frank [& mortgage cheat Chris Dodd, while we're at it] should be investigated, prosecuted and punished for crimes against the economy.

[pagar]

DOT, I read a different version somewhere else, and the leftists were claiming all the terrorists currently being held would have to be released because they had not been read their rights. I kid you not.

One of the problems, I think, is that not only have do none of the leftists have military training, none of the leftists have the slightest interest in defending America.
One of the few with any military training at all is Sen Kerry and anyone who thinks he is interested in defending America needs to go back and read his speech to the Senate sub committee on Foreign Relations, 22 Apr 1971.

[JM Hanes]

Republicans have made a huge mistake by concentrating on stimulus by tax cut, and singling out individual slices of pork. It's not the money, it's the intrusion of government into every nook and cranny of American life.

"They could put anything they wanted in that stealth bill. There isn't a soul in the world who could claim to have read it and understand it.

Unfortunately that includes reporters asking questions at pressers. There is, however, a soul who understands every bit of it: Nancy Pelosi, the woman whose brain has only one working instinct for power.

[JM Hanes]

Last week: Geithner is the only man in America who can hit the ground running.

This week: Give the man some time to get up to speed.

[pagar]

The newest joke:

Just three Republicans helped pass the plan on a 61-37 vote and they're already signaling they'll play hardball to preserve more than $108 billion in spending cuts made last week in Senate dealmaking. Obama wants to restore cuts in funds for school construction jobs and help for cash-starved states.

If those three so called Republicans know how to play hardball against anyone except Republicans, I'd be really surprised.

[JM Hanes]

MayBee:

Did you get the Andrea Mitchell view from the tube or print? I'd love to find a cite for my hot/not hot list.

[glasater]

The gold in the well and bullets on the porch crowd think the Heavy Pessimists are smoking dope.

OL~
You make me smile:-)

Bob Pisani--CNBC reporter--was talking with traders on the floor when he made the comment about the S&P going to 600.

[bad]

Market down 375 pts.

[bad]

Geithner looks untrustworthy. His ears look like Spock glue-ons and he generally resembles a weasel.

Add that onto his tax cheat status and his willingness to lie about the reasons for it in a confirmation hearing under oath and we get a tanking market.

Why the hell did they put him on TV?

[bad]

It looks like O is surrounding himself with people like Geithner and Biden so he'll appear to be a genius in comparison.

[bad]

Last week: Geithner is the only man in America who can hit the ground running.

This week: Give the man some time to get up to speed.

We wouldn't want him to rush, after all we're talking about money here.

The PorkUs BILL, on the other hand, must pass now or WE ARE DOOMED!!!

[narciso]

Just when the day can't seemingly get any worse, it kind of does, Sarah's not coming to CPAC, there will be a taped message.

[bad]

I'm so sorry, Narciso. What a disappointment.

[MayBee]

JMH- on tube, during her show just moments before I posted. I don't know when the transcripts will be out.

[Danube of Thought]

Jane, I didn't see the Kerry item, so if you rediscover it please let us know.

This is all quite astounding. Either this stimulus thingy will work within two years, or we could have quite an earthquake in the makeup of congress in 2010. For the sake of my investments I hope it works, but I can find precious little reason to expect that it will.

[MayBee]

Poor narciso!

[Rick Ballard]

Two hours until polls close in Israel.

Go Bibi!

[Old Lurker]

"Geithner looks untrustworthy. His ears look like Spock glue-ons and he generally resembles a weasel."

The way I think of these things is to imagine being across the table from them in some negotiation.

Say what you want about him, but negotiating with Paulson would scare the carp out of most people. This guy...it's like asking the teacher to change your grade.

[narciso]

Well I'm still going, never been to D.C, before, looking forward to making some contacts, and to meeting you Clarice.

[peter]

I heard Geithner being interviewed on Bloomberg radio around 1 PM. He was most unimpressive. He answered all substantive questions with "It's all very complicated so I can't reveal all the details." This is depressing that we have such bozos in power. Can't wait until George Soros croaks.

[Porchlight]

Sorry, Narciso. I know you aren't the only one who's disappointed. I'm glad you still plan to go.

[Porchlight]

Oops, that should have read, I know you aren't the only one who's disappointed, but I know you were specially looking forward to seeing her.

[Jane]

DOt - LUN

The stimulus is designed to kick in right before the 2010 elections.

Or we will all be under water.

[Thomas Collins]

Don't worry, narciso. The Prez of the UMass Amherst Republican Club is going to be there. He should provide some entertainment (I believe it was last year's CPAC conference when, in the question and answer session after Ann Coulter's speech, he asked Ann Coulter for her cell phone number (and his sisters put the clip on Facebook)). His parents were aghast (guess who is the father). :-))

[MayBee]

The noted economist Nancy Pelosi is talking now about how her bill created more jobs so she'll fight for it in conference.

[Rick Ballard]

"The way I think of these things is to imagine being across the table from them in some negotiation."

The knowledge that his looking like a weasel is simply a reflection of the inner core of his being would be helpful as well. The only feasible basis for negotiation would be for him to start counting out cash for something that I knew he wanted very badly.

Negotiating any deal that wasn't consummated in cash on the spot would seem to be a waste of time.

The market seems to have taken the measure of both His Nullity and TurboTimmy on this, their day of glory. I think what it is saying is "hucksters in cheap suits telling obvious lies probably won't be good for business".

[bad]

Market down over 400pts.

[Rick Ballard]

It's just pining for the fjords today, Bad. Don't worry, it'll be back on its perch in the morning.

Maybe not tomorrow morning though.

[bgates]

they're already signaling they'll play hardball

"Excuse me, Mr Reid, Sir, do you think after you roll back all of the spending cuts, we could keep additional expenditures in the low eleven figures, if it's not too much trouble?"

[Danube of Thought]

Thanks Jane--I'm gonna read it right now.

“We have tried spending money. We are spending more than we have ever spent before and it does not work….I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises….I say after eight years of this Administration we have just as much unemployment as when we started. … And an enormous debt to boot!”

--Treasury Secretary Henry Morgenthau, May 9, 1939

[Sue]

(guess who is the father). :-))

Thomas Collins.

How do republicans survive in Massachusetts?

[Danube of Thought]

Kerry: "We will succeed only by maintaining bipartisan support and public backing at home and winning back the Afghan people through a sustained commitment of additional civilian personnel, reconstruction funds and diplomatic engagement. Equally important, we need to execute this commitment without raising the stakes and turning Afghanistan once again into a magnet for the world's jihadists."

Good luck, John--and I loved the part about winning "back" the Afghan people. Like they were ours before Bush lost them...

[Ranger]

Pork in the "Stimulus"

http://corner.nationalreview.com/post/?q=MTFjMjRmYzc4OGZjZTU5ODJhZTk5NmU5OGIzNDNkMzk=>Sometimes a Picture is Worth a Thousand Words

[MayBee]

The noted Economist Barbara Boxer is saying Republicans didn't want to do anything to bail out Americans. Republicans happily spent for all those years and all the sudden they don't want to spend anything anymore.
This is a hostile act on the American People.

[bad]

What a dodge. O doesn't want to answer questions at his presser 'cause Geithner is going to cover all that.

Then Geithner says he's not going to give any answers either.

And nobody but us, and the markets, seem to care.

[LindaK]

I find this whole thing so demoralizing and scary. The perfect political storm meets the perfect economic storm. The only person who has a plan is Pelosi, which is the real catastrophe here.

[MayBee]

and turning Afghanistan once again into a magnet for the world's jihadists."

I guess I can't figure out why our presence isn't what's causing the violence in Afghanistan. If we leave, won't the jihadists leave too?
That's what was going to happen in Iraq.

[Publius]

DOT-
With the $4 billion of our tax dollars going to fund Acorn; with the next census being sampled from the WH; and with the bulk of the pork spending not being spread around until the next election cycle; I'd say the impact of the publics' opinion upon the 2010 election results will be the equivalent to one of Juan Valdez's coffee beans upon a Venezuelan election. (I know, the gerrymandering of the 2010 census won't be felt until the 2012 election, but I threw it in anyway for effect). :-)

[jean]

Speaking of hardball Sen.Bunning was questioning Geithner.I was wishing Bunning would just stand up and bean our treasury Sec.

[MayBee]

I think I have to turn off MSNBC. Norah O'Donnell is in full panic mode. She's asking everybody to verify the genius of the "what color of firehouse" analogy.

[bad]

Bunning beaning the weasal. One could write a book...for the children.

[bad]

When did O transition from

"Going line by line to root out waste from the budget" to

"going line by line through our medical records to choose who gets treatment and who doesn't"?

[clarice]

narciso, you will meet many other interesting people there and should have a great experience. Why don't you write the governor, tell her of your great admiration and offer to volunteer to work for her?

[jean]

Has it been said before Geithner has Spock ears.A tax cheating alien

[kim]

What makes you think, DoT, that Obama and the Press won't still be blaming Republicans in another two years?
===================================

[bad]

Schumer says we don't care about porky amendments.

I guess I don't know myself or the rest of you here.

[sbwaters]

Bad: It looks like O is surrounding himself with people like Geithner and Biden so he'll appear to be a genius in comparison.

Bad, that's how insecure people manage. B-grade leaders surround themselves with B-grade talent.

[centralcal]

Who knew that there is actually a website for Nancy Pelosi (or others) VooDoo dolls?

Aaahhh, Narcisco I just heard the news about Sarah skipping out on CPAC. What a bummer! But, hey, you get to meet Clarice (which many of us are envious of).

[MayBee]

Geithner just announced he used TurboTarp, so a few details might have been missed.

[Publius]

Bad-

Think of Biden as assassination insurance.

[bad]

y'all are killing me

TurboTarp, indeed

[Extraneus]

Why should we think the market is reacting to Gaithner today, rather than to the cloture vote last night? I say it's a reaction to the pork bill. Obama's pork bill. Not Nancy Pelosi's, not anyone else's. It's Obama's bill, and the market is tanking in reaction to it. The Dow has now dropped 17% since his election.

I defy anyone to prove me wrong on that.

[Thomas Collins]

Sue queried:

How do republicans survive in Massachusetts?

It's a character builder, Sue.

[bad]

Publius, I never thought I'd hear Biden and AI in the same sentence. What a twist...

[Extraneus]

Very fortunate that the media is blaming Gaithner today rather than the stimulus bill. Almost as if his bank-bailout announcement was pre-planned for the morning after the cloture vote.

I question the timing.

[Publius]

Bad:

As an afterthought I considered 'premature succession' as a more appropriate phrase but I had already hit the post button. It is implied that BHO is the insured and the VP is the premium, but I thought that was a given.

[MayBee]

Obama has one more chance to depress us this week, when he has a tOwnhall in his homestate. I bet there are some bad things going on there that he had nothing to do with, either.

[kim]

Hey, if Obama wants the market to go up he should just ban ads for gold.
=======================

[bad]

Publius, many old books used to use, "he ejaculated" instead of "he said."

Under that use of language, Biden becomes a premature ejaculator.

We had a classic book on tape for our family road trip years ago that used "he ejaculated" many times. The kids were too little to notice but Mr. Bad and I could barely control ourselves and made up an excuse to move to a different book.

At the moment, I can't remember which book it was.

[MayBee]

LOL, bad!

[Publius]

That's OK Bad, this is a family show anyway.
LOL!!

[Porchlight]

The perfect political storm meets the perfect economic storm.

Exactly, LindaK. Demoralizing is the perfect word.

And what else ticks me off is wondering why Repubs have to fight tooth and claw to get their agenda through, with much debate and dissection in the press, yet Dems sweep theirs in without anyone even noticing what's in the legislation let alone discussing it?

Actually I am not really wondering.

[Sue]

Thomas,

I noticed the character that someone very close to you learned. You should be proud, both of yourself and that special person.

[Old Lurker]

darnit Bad...I was trying connect those two posts but you did it beautifully! And so fast...

[bad]

It is an awesome accomplishment Thomas. Way to go.