Obama! Geithner! Banks! Bailout! Confusion!

Did Tim Geithner freak out when he heard his president say the following during the Monday press conference: "And so tomorrow my Treasury Secretary, Tim Geithner, will be announcing some very clear and specific plans for how we are going to start loosening up credit once again.”

Maybe so since Geithner's "plan" sounded like he was trying to fake his way through an essay exam that he didn't study for. Superstrategist Ed Yardeni helpfully outlines what was not in the "plan":

(1) There is no well-defined mechanism for removing toxic assets from the banking system.
(2) There was no mention of ring fencing bad assets.
(3) There was no mention of backstopping bad assets with government guarantees.
(4) There is no well-defined “bad bank.” Instead, there is a Public-Private Investment Fund, whatever that means.
(5) Nothing was said about the mark-to-market problem, which is exacerbating the crisis.
(6) Nothing was said about providing 4% mortgages, or any other initiative to revive housing.
(7) Nothing was mentioned about the drop in home prices, which has been the cause célèbre of the financial meltdown

Me: But other than that, it was pretty comprehensive. And forget about suspending mark-to-market accounting. Geithner's "strest test" would, in fact, push banks to recognize these losses in a nod to transparency. As economist Mike Feroli of JPMorgan Chase put it:

In an effort to prevent a large number of "zombie" banks from clogging up the financial system, regulators will encourage banks to value their assets at more "realistic" levels.  Such aggressive regulatory action could leave significant capital holes in banks that are forced to mark down their assets.

And that will force either huge capital injections or some form of quasi-nationalization.