I call this the "Geithner Two-Step."  Unlike the "Geithner Shuffle" (see one of my earlier diaries) this one is my original creation.  Step1: In response to a crisis, develop a plan that is both complex and vague.  Step 2: Just never do anything.  

This has been his approach to the problem that triggered the whole economic crisis: large quantities of suspect Mortgage Backed Securities (MBSes) held by banks.  I knew, months ago when I read his solution, that it would never happen.  Now here is the confirmation.

The guy is a do-nothing.

No, I do not believe the problems are "melting away" without actually being solved.  Nor do I believe we are starting a "recovery."      

Wall Street Journal, MAY 28, 2009

A government program designed to rid banks of bad loans, part of a broader effort once viewed as central to tackling the financial crisis, is stalling and may soon be put on hold, according to people familiar with the matter.

The Legacy Loans Program, being crafted by the Federal Deposit Insurance Corp., is part of the $1 trillion Public Private Investment Program the Obama administration announced in March as a way to encourage banks to sell securities and loans weighing on their balance sheets to willing investors.

But prospective buyers and sellers have expressed reluctance to the FDIC about participating for fear the program's rules will change in a political atmosphere hostile to Wall Street. In addition, some banks that might have sold troubled loans into the program earlier in the year have become less eager as they regained a sense of stability.

The scaling back of the FDIC program is potentially good and bad news for investors, indicating that the health of the financial system -- while improving -- remains fragile. Government officials are still concerned about distressed assets, including residential and commercial real-estate loans, which continue to rot banks' capital. FDIC officials said Wednesday some losses had not yet peaked and government officials believe banks still hadn't fully recognized the value of some distressed assets on their balance sheet.

Originally posted to nodular on Tue Jun 02, 2009 at 07:30 PM PDT.


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