WASHINGTON — The proliferation of government programs to combat the financial crisis is raising questions about how they will work in concert, who will staff them, and whether the overall response is too complicated to work effectively.
With this week's announcement of a two-pronged plan to buy troubled assets, the Obama administration has offered six programs since taking office two months ago. They augment about a dozen programs already in place to tackle problems from small-business lending to foreclosure prevention and recapitalizing banks.
What is missing, critics said, is an overarching strategy or any sense of how these myriad programs should work together.
We're "just living every day for the crisis du jour," Rep. Bill Posey, R-Fla., said at a House hearing Tuesday. "What's the next new plan that's going to solve all these problems? I really don't have much comfort in that, and I can't imagine how anybody would."
Though Federal Reserve Board Chairman Ben Bernanke argued in congressional testimony Tuesday that there is, in fact, a master plan, most observers see it as a collection of piecemeal efforts targeting individual problems.
"A lot of battles are chaotic at the beginning until the smoke begins to clear," Bernanke said.
Policymakers have not spelled out how the programs will work together. For example, as regulators conduct stress tests of large banks to determine whether they need additional capital, are they also identifying assets that could be eligible for the troubled asset purchase plan? Do banks have to ensure that they have tried loan modifications on pools of mortgages they offer for sale through the asset plan?
"They need to harmonize the plans so" they are not "overlapping or in conflict," said Ralph MacDonald 3rd, a partner at Jones Day in Atlanta.
Some observers argue that the government should combine some programs and drop others.
"They developed a plan for one part and then they developed a plan for another part," said L. William Seidman, a former Federal Deposit Insurance Corp. chairman and now a CNBC commentator. "It is in theory a great way to do each of these things, but in practice the administration" of all these programs "is going to take a lot of people a lot of time."
Seidman said that at some point the government may have to appoint a special board to oversee all the programs. "If as they go along they can see a way to coordinate this, they'll save a lot of cost and a lot of complications."
Just keeping track of the number of programs has become increasingly difficult. The capital purchase program was started last fall and has invested $198.5 billion in banks and thrifts. It has since been renamed the capital assistance program, and its exact focus is now unclear.
The Obama administration launched a foreclosure-prevention plan last month that itself is two separate plans: one to refinance loans held by Fannie Mae and Freddie Mac and the other to establish a nationwide standard for loan modifications. Congress has also created the Hope for Homeowners program, which is supposed to help underwater borrowers refinance into loans backed by the Federal Housing Administration.
In addition to the stress tests of banks, the administration has unveiled a plan to use Troubled Asset Relief Program funds to reboot small-business lending.
The toxic asset program also includes two plans, one an auction process for investors to bid on illiquid mortgage assets and another an expansion of a Fed program to help illiquid securities. These are all in addition to the roughly 10 programs the Fed has in place to provide liquidity and backstop various industries, including the money market mutual fund and corporate paper markets.
Some say the government can never hope to stop the financial crisis until it figures out a comprehensive solution that would be easier to manage.
"They are bogged down in their own implementation," said Joseph Mason, a professor at Louisiana State University. "These overly complex plans in many cases have no hope of being implemented. What's needed is a simple, straightforward, meaningful approach."
But others say the number of programs makes sense given the scope of the crisis and the need to experiment with solutions.
"The overlapping of plans reflects evolving thinking about what the problems are and also evolving innovations about: 'Well, why don't we try this? Why don't we try that?' " said Charles Calomiris, a finance professor at Columbia University.
At least part of the problem may be that new programs roll out before the older ones are even implemented. "It's a juggler with five balls in the air that isn't that good of a juggler," said Kip Weissman, a partner at Luse Gorman Pomerenk & Schick. "Treasury has not proven that it has the resources to efficiently execute any of these programs. … They can't execute everything on their plate, and they are expanding their plate every day now."