The size of the Treasury rescue is massive, but officials couldn't give many details about how it will work.
For example, there was no explanation of how to value the banks' bad assets, nor how to get aid to homeowners to prevent more mortgage foreclosures. Geithner, who's been on the job for only two weeks, warned that the solutions to the credit crisis will take time. But the lack of details created the impression of another hastily conceived plan to put taxpayer dollars at irretrievable risk for questionable gain.
Taxpayers have seen the prequel, and it wasn't pretty. In the last few months of the Bush administration, then-Treasury Secretary Henry Paulson beseeched Congress for $700 billion to bail out banks. Congress agreed, and Paulson quickly dispersed half of the fund.
His action probably prevented a total meltdown in the financial industry, but it did little to ease lending or blunt the broader recession. Worse, the government cannot account for much of the $350 billion.
Many of the banks that took the first half of the bailout money don't feel obligated to say what they did with it. Wells Fargo, for example, may or may not have used some of its initial $25 billion to buy Wachovia. The government encouraged such behavior by handing out the money with few strings attached.
Geithner and President Obama vow this time will be different. They say they will insist on transparency, which should've been a basic requirement in the first go-round. They also want tougher conditions on banks receiving aid, including requiring institutions to document how the money spurred new lending. Those rules, and salary caps for CEOs, could help stamp out the largesse of some banks as they paid for corporate retreats and jets.
The package also includes $50 billion to stem mortgage foreclosures. Treasury will work with the Federal Reserve to reduce monthly mortgage payments and set up guidelines for banks to modify loans, action that is sorely needed. But Geithner wasn't ready to provide details on that plan, either, saying he will do so in a few weeks.
In an economy suffering from a widespread lack of confidence, the administration's rollout yesterday only contributed to that mood.