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Vague Banking Rescue Feeds Public Misgivings

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The Tampa Tribune

Published: February 11, 2009

Tuesday was not a good day to feel better about the nation's economy.
Treasury Secretary Timothy Geithner offered a bank-rescue plan that raised more questions than it answered.
Federal Reserve Chairman Ben Bernanke described the financial crisis as "extraordinarily severe" and reassured Congress that the amount of stimulus being pumped into the economy won't cause inflation because the economy is too sick to overreact.

The nation learned that what has been done so far may have kept the economy from falling off a cliff but didn't stop its slide down hill.

The stimulus bill that passed the Senate leaves Democrats and Republicans deeply divided over the correct approach. They seem more interested in blaming each other for making things worse than in working together. Partisans on both sides are using the recession to rally their most loyal supporters.

President Obama's first challenge is to lower the volume of the debate and take action that rebuilds confidence. His strong speech Monday night was a step in that direction, and Florida Gov. Charlie Crist is right to spend some of his own political capital backing Obama's hopeful tone.

But the president should push Geithner and others in his administration to fill in the vital details of their plans. Uncertainty is delaying the economic recovery.

Geithner promised that his Treasury plan would restore credit to major banks that were stressed, but he also talked of a "stress test" banks must pass to qualify for help.

The implication is that banks with too much stress would get nothing. Perhaps that's necessary, but the effect is the same as if an airline pilot told the passengers that he'll be able to pull the airplane out of its downward spiral but only if some of them get tossed out to lighten the load: "We'll tell you who it will be later, but for now, just calm down."

No wonder the market fell on the news of Geithner's plan.

He is right that the nation's credit engine must be repaired, and once an effective plan is understood, confidence will rebound.

"Without credit, economies cannot grow," he correctly said, "and right now, critical parts of our financial system are damaged. The financial system is working against recovery, and that's the dangerous dynamic we need to change."

There are also some less dangerous dynamics at work, even in areas of Florida hard hit by foreclosures and plunging home values.

Mortgage rates are low.

Buyers are finding tremendous deals on nice houses in good neighborhoods.

A long-awaited federal initiative to help homeowners avoid foreclosure will be announced in a few weeks.

A so-called "bad bank" will be set up to buy the bad assets of private banks and help get them lending money again.

Things will get better. Unfortunately, too little that Geithner said Tuesday helped us envision better times soon.

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