The conventional wisdom follows the stock market. Who cares whether the toxic waste fix-it plan will work?
Let us now sing the praises of what a 500 point rise in the Dow can do for a treasury secretary’s reputation. Before the beginning of trading in New York on Monday, the price of a share of Geithner’s stock was setting new lows. Case in point: John Heileman’s long, overheated look at Obama’s economic brain trust in the current New York magazine, which stakes out new frontiers in Geithner criticism.
Heileman describes Geithner’s infamous speech one month ago outlining the Treasury’s banking plan as follows:
Speaking slowly, as if he were on a mild sedative, swaying side to side, his eyes darting from left to right as he labored to read from the teleprompters flanking the podium, Geithner gave a performance positively McCainesque in its degree of maladroitness.
That is ridiculous. I watched that speech as it was delivered and wrote about it immediately. The problem with the speech was not its delivery but its lack of crucial detail. Geithner is no Obama when it comes to oratorical prowess, but neither is he “McCainesque.” The rest of Heileman’s piece, which breaks zero new substantive ground, continues to overstate the case, often relying on anonymous quotes for its most damning criticism. At its best, it is a remarkable distillation of what passed for conventional wisdom regarding Obama’s economic record so far, as of last week.
But of course we can throw out all that conventional wisdom, because as of today we have a new conventional wisdom. Right?
It was bound to happen sooner or later.
Treasury Secretary Timothy Geithner — who hasn’t had many winning days in his short tenure on Pennsylvania Avenue — scored a big political victory Monday, as Wall Street traders breathed new life into his career with a stock market rally of nearly 500 points.
Wow! That was fast. From roadkill to a big political victory, in the passage of time measured by the opening and closing bells of the New York Stock Exchange. And yet, as numerous commentators have noted, just because the stock market likes what it heard today, doesn’t mean the plan is a good plan. If we’ve learned anything about investors over the past two years, it’s that the best and the brightest of Wall Street aren’t very good at judging risk. Viewed thusly, their enthusiasm is yet another reason to run for the hills.
Or is it? At the end of this long day of toxic asset waste management, one of the Economist’s Free Exchange anonymous bloggers provided the most convincing reason to be encouraged by today’s stock market reaction. And hilariously, it has nothing to do with the merits of the Geithner plan.
Tonight, every newscaster in America will say, more or less, the following words: markets were up strongly today on expectations that the Treasury’s banking plan will succeed … If people become convinced that a plan will work, they’ll begin to make bets based on expectations that the plan will work, which will make the plan work regardless of what the plan is. I don’t know whether the rally will stick or not, and the broader economy will follow its slow path toward eventual recovery in any case, but this certainly has the potential to change the psychological dynamic that had prevailed, of lost confidence in Mr Geithner and in the banking system. And that would have to be considered a big win for the Obama administration.
To quote the late, great Tug McGraw: “Ya Gotta Believe!”
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