The First Rule About TARP II Is That There Are No Rules
Bad as the stimulus was, it will almost certainly have less long-term impact than TARP II. Which was why the Obama administration was so careful about getting the details right before announcing the framework of financial bailout plan last week. Oh wait.
Just days before Treasury Secretary Timothy F. Geithner was scheduled to lay out his much-anticipated plan to deal with the toxic assets imperiling the financial system, he and his team made a sudden about-face.
According to several sources involved in the deliberations, Geithner had come to the conclusion that the strategies he and his team had spent weeks working on were too expensive, too complex and too risky for taxpayers.
They needed an alternative and found it in a previously considered initiative to pair private investments and public loans to try to buy the risky assets and take them off the books of banks. There was one problem: They didn't have enough time to work out many details or consult with others before the plan was supposed to be unveiled.
The sharp course change was one of the key reasons why Geithner's plan—his first major policy initiative as Treasury secretary—landed with such a thud last Tuesday. Lawmakers, investors and analysts expressed dismay over the lack of specifics. Markets tanked, and fresh doubts arose about the hand now steering the country's financial policy.