Obama's Surprising Screw-Up
President Obama's handling of the new financial rescue package was surprisingly tone deaf and inept. It's all the more remarkable that he and his Treasury secretary seemed to repeat the mistakes of President Bush and Treasury Secretary Henry Paulson, whose approach was pretty much a blueprint of what not to do,
Obama clearly intended to reassure nervous markets by coming up with a new plan quickly. But when so much is at stake and restoring confidence in the country's credit markets and financial institutions is so important, the one thing worse than acting slowly is throwing out a half-baked proposal that leaves vague not just the ultimate cost, but even how its different parts would actually work.
Obama late Tuesday blamed the nearly 400-point drop in the Dow on the day the plan was announced on Wall Street "hoping for an easy out" and not finding it in the package. Perhaps. But what rattles the markets more than anything is confusion, which is exactly what was created by the plan Treasury Secretary Timothy Geithner outlined in extremely broad strokes yesterday.
To make matters worse, Geithner's announcement was preceded by an enormous buildup. Details were leaked over the weekend, including an estimated extra cost of $1 trillion. And at his first primetime news conference, the night before the plan was released, Obama heightened expectations by saying Geithner "will be announcing some very clear and specific plans for how we are going to start loosening up credit once again." He also ducked questions about specifics of the plan by saying he didn't want to draw attention from the actual announcement.
So when the plan that was unveiled raised more questions than it answered and had such loosey-goosey cost estimates that news outlets came up with conflicting estimates, of course there was widespread criticism and confusion. And the confusion was exacerbated by the fact that whatever the precise cost, most estimates put it far closer to twice what had been leaked before, $2 trillion or even more.
Given how hard Obama and his team have worked at crafting an image of the new president as confident, sure-footed and calm in the midst of a crisis, it's simply inexplicable that they would be so careless about one of their most important proposals. And if anyone should know better, it's Geithner, who from his seat at the Fed worked with and argued with the Bush adminstration as it rushed to put together a plan and sell it to Congress. Geithner has been among that plan's harshest critics and the new one was supposed to be a vast improvement. However, while Geithner certainly shares a good bit of the blame, he did not go marching out in front of the cameras with incomplete homework without Obama's backing.
The problem could extend far beyond the simple appearance of sloppiness and miscalculation. Congress is already livid over various problems with the previous measure and is demanding more oversite and caution and Obama will need its support for the new plan to be effective. Lawmakers, however, are going to be extremely leery of following the lead of an uncertain administration and is already raising serious questions about the new plan. They may simply lose patience and start working on their own rescue package.