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WaPo: Geithner plan was incomplete

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Following up our discussion last week on why the much heralded Geithner plan was received so poorly by the markets.

The Washington Post reports:

“According to several sources involved in the deliberations, Geithner had come to the conclusion that the strategies he and his team had spent weeks working on were too expensive, too complex and too risky for taxpayers.

They needed an alternative and found it in a previously considered initiative to pair private investments and public loans to try to buy the risky assets and take them off the books of banks. There was one problem: They didn’t have enough time to work out many details or consult with others before the plan was supposed to be unveiled.

The sharp course change was one of the key reasons why Geithner’s plan — his first major policy initiative as Treasury secretary — landed with such a thud last Tuesday. Lawmakers, investors and analysts expressed dismay over the lack of specifics. Markets tanked, and fresh doubts arose about the hand now steering the country’s financial policy.

Public acceptance of the plan suffered from several missteps, said sources involved in the decision-making or in close contact with those who were.

The Obama administration, they said, failed to rein in the grand expectations built for the plan on Wall Street and in Washington, concluding that they would rather disappoint the markets with vagueness than lay out a lot of details they might have to change later…”

They won’t make the same mistake twice. Whenever the fully fleshed out plan is unveiled, I expect it will be to a positive market reaction. Last week there was a big buildup, fueling high expectations and the plan (or lack thereof) disappointed. Now, just a detailed and complete plan will exceed expectations – regardless of content.