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February 11, 2009

Why Did the Market Tank? Blame Obama

Interesting analysis here: The problem (as far as Geithner's plan) wasn't just Geithner's plan. It was that Obama had greatly oversold it the day before as super-duper-amazing.

Expectations were riding very high that Treasury Secretary Geithner would pull a rabbit out of a hat, in a speech billed as an announcement of bold, new plans to stabilize the banks. Obama himself, the night before in his press conference, assured us in the manner of a glib salesman that Geithner’s speech would be most impressive.

You can see how impressive from a chart of the stock market....

So if Obama’s team really believe that this problem is a simple matter of building enough confidence among the world’s investors to come back out and play, they’re very wrong. And this is why I think Geithner looked and sounded so uncomfortable yesterday. He actually knows quite a bit about how banks and markets operate. And he knew he’d been sent out to sell a case for recovery that was about as compelling as when President Gerald Ford told us all to fight inflation by wearing WIN buttons.

I really don’t know why the Obama people chose to set up this speech as an oracular pronouncement that would bring confidence back to the markets, and I don’t know why the political team (including David Axelrod) got mixed up in helping Geithner decide what to say. Geithner has the experience and the intellectual equipment to do his job. What on earth was Axelrod doing in the room?

This says a great deal about the new President. He’s evidently seeing the twin crises as a problem of confidence that he can solve by waving the right magic wands. Obama has invested a very great deal in the story that he and his people are far ahead of George Bush, Henry Paulson and the now-hated TARP rescue plan. And not only Obama but also Congress, with Barney Frank having said on multiple occasions that the Democratic version of TARP would be very different and would work much better.

That does say a great deal about Obama, and it's not good. He simultaneously underestimates the difficulty of the problem, under-understands the problem in the first place, and overestimates his ability to work magic just by speaking his awesome magic words.

Faith-based presidency, anyone? George W. Bush may have had a misplaced confidence, but at least he drew that confidence from God Himself, not from Himself Himself.



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posted by Ace at 02:30 PM

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