Today was called the day of reckoning by many of Secretary of Treasury Timothy Geithner’s critics. And, there have been plenty of critics of late. Many have been sitting on the sidelines, offering nothing of substance and a lot of critical analysis, waiting for Tim Geithner to fail on all fronts. In fact, it almost seemed as if some were wishing Geithner would fall into a black hole and pull President Obama in behind him.
For weeks there has been criticism of the man with no plan. As Geithner was being downgraded in the hearts and minds of those who confirmed him, there were a few who could be seen gloating on the hopes that today’s financial rescue plan would be his final misstep. Some have even called for his resignation. Thank goodness the day of the guillotine has passed or some would have put Mr. Geithner’s head on the chopping block.
Today Secretary Geithner laid out his plan. A few have been critical. But, the overall picture is that the stock market is up today, something that has not happened following any previous Geithner speeches.
On Monday at 12:10 p.m. ET, the 30-stock Dow Jones industrial average was higher by 312.30 points at 7,590.68. The broad S&P 500 index added 34.27 points to 802.81. The tech-heavy Nasdaq composite index gained 60.70 points to 1,517.97. NYSE breadth was 27-2 positive, while Nasdaq breadth was 21-4 positive. Trading active.
Perhaps beyond the Geithner plan, the rise in existing home sales helped the rise in stocks.
The market was also boosted by a report that February existing home sales rose 5.1% and prices fell.
So what does the new Treasury plan offer?
Under the new program — the Public-Private Investment Program — the Treasury Department, Federal Reserve and Federal Deposit Insurance Corp. plan to work with private investors to try to restart a market for these troubled assets. The federal government will use as much as $100 billion in funds from the Troubled Asset Relief Program and capital from private investors in order to generate $500 billion in purchasing power to buy legacy assets, Treasury said. The department said the program could potentially expand to $1 trillion over time.
The program would address both the legacy loans banks are holding on their balance sheets and the legacy securities backed by mortgage-related debt that is clogging the balance sheets of financial firms.
“By providing a market for these assets that does not now exist, this program will help improve asset values, increase lending capacity by banks, and reduce uncertainty about the scale of losses on bank balance sheets,” Geithner said in an op-ed piece published in Monday’s Wall Street Journal. “The ability to sell assets to this fund will make it easier for banks to raise private capital.”
Geithner may have redeemed himself in the eyes of some. However, he will continue to have his critics. Some are nay-sayers regardless of what happens. But, for those who have set forth the idea that stocks plummet every time Geithner opens his mouth, today must have come as a surprise.
You must log in to post a comment.