You might remember that last week Treasury Secretary Tim Geithner delivered a much anticipated speech on the next steps Treasury would be taking to bring stability back to the financial and banking sectors.
The question was why?
There were many who thought maybe President Obama had erred in selecting Geithner for this role, and to be honest I wondered it myself.
Geithner's plan as he presented in a live speech and press conference lacked details, and the Secretary looked scared. He made pronouncements about elements of the plan, but then said that we'd learn about the details eventually. Investors were not impressed, and the markets fell hard and quickly.
The question again was why? It turns out that Geithner decided late in the process that the plan he'd been working on was not going to work. So at the last moment he scrapped it entirely. Once the Treasury secretary and his team realized they would need a different approach, they had to decide how to present a plan that was still coming together. As they saw it, the Bush administration had a habit of presenting plans with details they had no intention of sticking to, which didn't exactly inspire confidence. Geithner preferred to "disappoint the markets with vagueness than lay out a lot of details they might have to change later."
At the same time the Treasurey Department has a shortage of personnel. To date, President Obama has not nominated any assistant secretaries or undersecretaries at Treasury, and the handful of mid-level staffers who have started work are still finding their offices and getting their building passes and BlackBerrys.
In addition Geithner and his team made a strategic decision to limit input from the financial industry and other outsiders, aiming to prevent leaks and avoid a perception they were designing the plan for the benefit of big banks. But that also meant they were unable to vet their plan with the companies involved or set realistic expectations of what would be announced.
All this combined to lead to the flop last week. Lets hope the extra time helps them to get a better plan, which can actually succeed.