A great failure of nerve
How serious is this setback? One interpretation is that Mr Obama’s crew mismanaged expectations—that they promised a plan and came up with a concept. If so, that is a big mistake. Managing expectations is part of building confidence and when so much about these rescues is superhumanly complex, it is unforgivable to bungle the easy bit.
More worrying still is the chance that Mr Geithner’s vagueness comes from doubt about what to do, a reluctance to take tough decisions, and a timidity about asking Congress for enough cash. That is an alarming prospect. “Banksters” may be loathed everywhere (see article), but more money will surely be needed to clean up America’s banks and administer the financial fix the economy needs. That, as this newspaper has argued before, means both some form of “bad bank” for toxic loans (with temporary nationalisation part of that cleansing process, if necessary) and guarantees to cover catastrophic losses in the “good” banks that remain. Mr Obama’s
team must recognise this or they, like their predecessors, will come to be seen as part of the problem, not the solution.
The Economist, 14/02/09 p. 10