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Lawrence Kudlow
Lawrence Kudlow
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Is Tim Geithner Ready for Prime Time?

Comment

The day after President Obama's big news conference, and on the day Treasury man Tim Geithner unveiled his Bank Bailout Nation TARP III Plan, stock markets plunged in a vote of no-confidence, with the Dow dropping nearly 400 points.

Obama got the ball rolling by painting a dismal picture of the U.S. economy, saying recovery won't arrive until 2010 at the earliest. He then said only big-government spending can jolt our economy back to life. He also bitterly attacked supply-siders and the Bush tax cuts, especially "tax cuts that are targeted to the wealthiest few Americans." He added that these strategies have "only helped lead us to the crisis we face right now."

You can say a lot of things about President George W. Bush's big-government mistakes. But blaming the Bush tax cuts for the credit-crunched downturn is utter nonsense. It's ideological politics at its worst. (It's worth noting that while Obama was trashing supply-siders on Monday night, Scott Rasmussen's latest poll showed 62 percent of U.S. voters wanting the stimulus plan to include more tax cuts and less government spending.)

Later in the news conference, Obama acknowledged how businesses that suddenly couldn't get credit pulled back on their investment and laid off workers — workers who then cut back on their spending. That — along with the Fed's stop-and-go monetary policy and a huge oil shock — is much closer to the true cause of this recession.

This is all most strange. Obama's attack on supply-side economics would rule out the successful Kennedy-Johnson tax cuts that spurred growth in the 1960s and the Reagan tax cuts that ignited growth in the 1980s. Even Bill Clinton cut the capital gains tax. And George W. Bush's tax cuts helped generate a six-year economic expansion before the oil shock and credit crunch took hold.

On Tuesday morning, stocks opened down about 75 points in the wake of Obama's pessimism. But stocks really started to tumble when Geithner stepped to the microphone. He totally bombed in his debut.

Geithner had no real plan to deal with the problem of unmarketable toxic assets on bank balance sheets. He offered no new architectural structure, no good way to remove the toxic assets, no clear pricing or funding proposals, and no meat on the bones.

According to Merriam-Webster, a "plan" is "a detailed formulation of a program of action; a method for achieving an end." But Geithner had none of this.

As a result, stocks plunged about 250 points. Prominent investment strategist Ed Yardeni described Geithner as an empty suit with an empty plan.

A week earlier, ace CNBC reporter Charlie Gasparino scooped the speech by chronicling how Wall Streeters advising the Obama administration talked Geithner out of a government-backed "bad bank" that would somehow buy toxic assets to be either worked out profitably or resold to private investors. These were the same "greedy" executives that Obama and Geithner had been trashing. So now Geithner talks vaguely about some sort of public-private investment fund that will use government capital and provide financing for private investors, who are then supposed to buy toxic assets.

Nobody on Wall Street is buying it right now. Geithner said the fund might cost $1 trillion, but there's no "there" there. No wonder bank stocks dropped 12 percent on Tuesday.

By the way, Geithner did not offer any regulatory accounting relief, such as putting an end to the disastrous mark-to-market rule that has wrecked bank capital and is one of the root causes of the whole financial problem.

Geithner did talk about an expansion of the Fed's Term Asset-Backed Lending Facility, or TALF, to help finance consumer-loan securitization packages that provide upward of 40 percent of all consumer and small-business lending. This might work, but again there were no details. And the Fed has yet to start its TALF operation.

Finally, Geithner talked about a comprehensive $50 billion housing-and-mortgage modification plan. But once again, no details — especially on the controversial issue of having bankruptcy judges determine home-loan interest rates and lending totals without bank recourse to contractual obligations.

One positive comes from a New York Times story claiming that Geithner beat back Obama's political advisers who want to nationalize big banks, fire senior bank executives and establish heavy government controls over bank operations. But at the end of the day, the absence of any clarity or pragmatic details from Geithner left stock markets sadder and poorer for the effort.

Geithner would have been better off not giving a speech until he could put real meat on the bones. What he pulled Tuesday was a classic rookie move that will further erode the public's trust in his capabilities. Following the controversy over his late payment of taxes, this bank-plan blunder could be another nail in his coffin. Apparently, Tim Geithner is not yet ready for prime time.

To find out more about Lawrence Kudlow and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate web page at www.creators.com.

COPYRIGHT 2009 CREATORS SYNDICATE INC.



Comments

4 Comments | Post Comment
A ship of fools run by amateurs. Heading for the rocks. Rudder gone. No life jackets. SOS!
Comment: #1
Posted by: Juanito Verde
Thu Feb 12, 2009 6:41 AM
Iss there any hope that these swell-headed bloviators will ever get the sensible thought that---just because a speaker does not say what you expected him to say does not mean he did not say the right thing. More likely your expectations were wrong. But that is the same way it is with stock analysts. If a stock price or earnings report "does not meet expectations" It was not the stock that was wrong. Just maybe the expectations were wrong, proven by the actual facts.
Comment: #2
Posted by: Dave B.
Sat Feb 14, 2009 7:29 PM
Sir;... I don't care for Mr. Obama... He sees too much through the forms of law and government and politics and does not see beyond them... He is absolutely correct in his analysis: Too much money to the rich is the problem, and is the problem in every depression... High profits is synonymous with Glut, meaning depression... That is what Das Capital says...Of course, when you working with paper money and not with specie, you can inflate the currency and delay the normal depression until it becomes a major meltdown... All Reagan, and his loyal minions have done is accelerate this country toward depression and revolution.... I know you can sell tax cuts for the rich on letting the workers keep more of their money... It does not work when the rich never were paying their share... Let them have more... Just let them have it all...Then we can all figure out that an economy is made of the free flow of values; and when the rich have all the values, when it owns all the property, and has all the money, and it owns the government, and has a mortgage on all the productive capacity of the country, then there is no free flow of values, and no flow of values what so ever...Your economy is cooked...Can you say it is because the rich have not had their way??? They wanted it all, and now they have it all; but in having it all they wreck the whole thing... The game is not supposed to be won, but played... The rich have won, but now the game is meaningless, and now we have to find new meanings... Will the economy be saved???† Not for long... If the government does not have the courage to tax the rich, to despoil them, then the game is done... As it should be... The parasites have defined themselves... Let us remove them... thanks...Sweeney
Comment: #3
Posted by: James A, Sweeney
Sun Feb 15, 2009 9:40 AM
"A rookie move?" Get used to it. We've got a rookie leading a bunch of rookies. Only problem is, they think they're smarter than everyone else.
My IRA has lost 1/3 and 3 years into retirement, my wife and I are both getting ready to go back to work.
Comment: #4
Posted by: webass
Tue Feb 17, 2009 12:39 PM
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