Timothy Geithner's press conference just ended, with a thud. The stock market is dropping like a rock, currently down $306. Bank stocks are down 10% on average. The financial news reporters are picking apart the plan.
Not the WOW factor we were hoping for yesterday. President Obama teased the plan last night during his first press conference, now I know why he didn't deliver it. The Financial Stability Plan is going to be very costly and come with strings attached.
Geithner started by explaining the causes of our current crisis situation, basically greed and no oversight. From there he formulated the reasoning for the following changes in U.S. policy:
- The new policy must be comprehensive in scope.
- It must be sustained until economic recovery is well established.
- Government support will be transparent. New website to monitor this is www.financialstability.gov
- Private capital will be mobilized and backed by the government.
With these changes in the Treasury policy Geithner rolled out a three point plan to get credit flowing and raise consumer confidence.
- It will require lenders to go through a "stress test" to analyze the assets and liabilities on their books. After a passing grade government capital will come with conditions and terms to encourage lenders to convert government funds to private investor funds.
- A public/private investment fund will be created(aka bad bank) to finance the toxic assets. The starting price tag is $500 billion. The structure of this fund has not been created and they are still looking for input. It will be managed by private asset managers.
- Finally, the plan calls for committing up to $1 trillion, in addition to the previous $500 billion, in funds to free up credit for loans to consumers and businesses.
The Treasury Secretary finished by mentioning the Housing Program Plan which will be rolled out in the coming weeks. This plan will target our slumping housing market and ways to keep foreclosures to a minimum and reviving the demand for housing.
Like a wrote yesterday we needed this plan to be well accepted by investors, consumers and have bipartisan support. The news conference included little or no explanation as to how the plan would be implemented, nor did he take questions after finishing. I'm not sure President Obama and Treasury Secretary Geithner pulled it off. I didn't see the knockout plan we needed to revive our housing market and slumping economy.
Troy Batson is a licensed Broker in the State of Oregon ~ troybatson.com ~ Duke Warner Realty ~ Bend, Oregon