Groundhog day: Geithner botches another bailout
The new US Treasury secretary took just three weeks to disappoint those hoping he could find a way to save the US banking system and give a lead to the rest of the world. He has put off creating a bad bank to purge the system’s toxic assets but its day will surely come. There are bad banks aplenty now and when they inevitably collapse, taxpayers will pick up the mess. Peter Lee reports.
WHEN US TREASURY secretary Timothy Geithner brought his eagerly awaited financial sector stabilization plan to the Senate banking committee on February 10, ranking member Richard Shelby greeted him with a caustic reminder of how poorly thought out and ineffective the previous Tarp legislation, brought in by predecessor Hank Paulson, had been.
Giving Geithner’s proposals the big build-up, senator Shelby told him: "I hope they’re not more of the same. I hope you’re smarter than that."
Unfortunately for Shelby, it turned out to be Groundhog Day in Washington. Geithner’s sorry performance casts a shadow over the financial sector and presages a long winter for the global economy. A new Treasury secretary, in a new administration, had nothing much new to propose and, apparently, no clear idea at all of what to do to restore the US banking system. Some of the biggest banks are now being kept barely alive with taxpayer insurance against losses on problem assets and guarantees for funding. But they are not healthy enough to support the economy in its hour of greatest need with much in the way of lending.