Geithner Plan Receives Mixed Reviews

Treasury Secretary Timothy Geithner outlined the Obama administration's economic recovery strategy on Tuesday - dubbed the ""Financial Stability Plan"":http://dsnews.comindex.php/home/news_story/2537 - and on Wednesday, Geithner was called before Congress to defend the tactics he proposed.
Lawmakers argued that Geithner's announcement was short on specifics and pressed him to be more forthcoming with details on the programs he spoke of yesterday.
""Sen. Jeff Sessions"":http://www.jeffsessions.com/default.aspx (R-Alabama) said at the Senate Budget Committee hearing held Wednesday, ""The market has made clear that certainty and stability are commodities of great demand; unfortunately, that is not what we received yesterday. Secretary Geithner, you need to give a detailed plan in clear terms of how we are to proceed. You've had more than a month to work on the proposal, but what we've heard is an outline.""
Geithner, however, did not offer the congressional leaders any additional information, saying that the Treasury is still defining the structures of the new programs. ""The president, the Treasury, and the entire administration are committed to working with you to see it [the new plan] through because we know how directly the future of our economy depends on it,"" Geithner said.
John A. Courson, president and CEO of the ""Mortgage Bankers Association"":http://www.mortgagebankers.org (MBA), applauded Geithner's plan, particularly his pledge to help homeowners obtain more affordable mortgage payments by bringing all stakeholders together around a uniform and workable standard for modifying loans. ""[Geithner's] announcement represents a significant step forward in the effort to restore confidence in our financial institutions, stabilize the credit and housing markets, and address some of the systemic problems currently plaguing our national economy,"" Courson said.
Adding his vote of confidence for Geithner's strategy, Tim Ryan, CEO of the ""Securities Industry and Financial Markets Association"":http://www.sifma.org (SIFMA) and a former manager of the savings & loan clean-up, said the Obama Administration was ""wisely applying some of the most important lessons learned during the S&L crisis, using public-private joint financing to encourage the return of private investment.""
Meanwhile, those private investors seem poised and ready to shoulder some of Financial Stability Plan. Wilbur Ross, private equity and distressed debt investor, told the _""Financial Times"":http://www.ft.com_ that the involvement of private capital and the idea of private-public partnerships on specific pools of assets rather than a catch-all ""bad bank"" were steps in the right direction.
Wilbur said, ""We would be prepared to commit a lot of capital and so would other people. Private equity is pretty good at figuring out what the value of assets should be,"" the _Financial Times_ reported.
Other private equity investors said they were also relieved the authorities were planning to involve them in the project, warning that a government-controlled ""bad bank"" could have disrupted the market for distressed assets by pushing prices artificially higher, the _Financial Times_ said.
Although some in the investment community professed optimism about the new path to economic recover, the markets fell sharply after the plan was announced on Tuesday but saw minute gains on Wednesday. Analysts say the decline was not necessarily because of resistance to the plan, but because again, Geithner skimped on the details.
Lawrence Summers, director of the ""National Economic Council"":http://www.whitehouse.gov/administration/eop/nec/, told the _Financial Times_, ""The test of a policy is its ultimate effect on flows of credit, not the one-day market response. The president has made it clear that the objective of our administration's policy is to strengthen the economy over time.""