Newly-minted U.S. Treasury Secretary Timothy Geithner did not talk about the Obama Administration’s comprehensive financial rescue plan last week, or yesterday. It just wasn’t ready. He’s expected to make a statement today, and to testify before the Senate Banking Committee this afternoon, revealing an outline of the plan. Financial market participants are not complaining about the delays, but instead are praising the administration’s caution. “I do think it’s calming,” says Dory Wiley, president and CEO of Commerce Street Capital, a privately-held investment bank based in Dallas, TX. “But it may be a false calm, a false sense of security. Everyone is looking to government for solutions. People forget that the solutions don’t all lie with government.” Wiley also notes a “false sense of high expectations—people want things back to how it was, and that’s just unrealistic.”
A general framework of the White House initiative has emerged. It reportedly will include some kind of government/private sector bad bank designed to soak up abhorrent, loss-inducing assets; more capital infusions into the banking system, with stricter accountability; foreclosure relief combined with national loan modification rules; and a push for increased lending, possibly tied to the Federal Reserve’s Term Asset-Backed Securities Loan Facility.