Not a Touchdown, Timmy!

What an appalling day. Our U.S. Treasury Secretary, Timothy Geithner (aka Turbo Tax Timmy – I like that moniker), tells us how the Treasury is fully on the crime scene today, with additional capital injections and some sort of murky public/private program to buy toxic assets. All this noise sounds like Hank Paulson Part II. There was little if any substance released to the public, and frankly, Geithner himself may not have any more detail to add. He may not know that he doesn’t know!

Unfortunately, he is in over his head. I hate to be a skeptic, but the events unfolding before my eyes today, with the S&P500 down close to 5% as I type, are absurd.  The thing that boils my blood is the idea floated by Geithner to submit banks to a “stress test.” Huh?! Have the banks not under-gone a stress test in the past 12 months? Aren’t the results plainly evident?  Have we not determined many banks are insolvent?! What is left to “test?” Without government (taxpayer) assistance, many financial institutions would be toast right now.

It is absolutely clear the emperor has no clothes. Those hanging on to Obama’s rhetoric of “hope” are going to be severely disappointed. His appointed Treasury Secretary is blowing up before our very eyes. I recall a particular game we “played” in MBA school, where we stress-tested our hypothetical bank to various scenarios. Well, I can assure you, whatever unforeseen and least predictable event you can imagine (call it a Black Swan if you will) is what we are experiencing. And it ain’t a TEST!!!

Why are they making things so complicated? Bloomberg News reported this week that the total bailout and stimulus costs, including loan guarantees, could be as much as $9.7 trillion. The Federal Reserve estimates that the total value of all home mortgages in the U.S. is $10.5 trillion.  Mortgages are what set off the current crisis, right? For barely more than the government is spending on various other boondoggles, they could have paid off every single mortgage in America!

Voila, no more stressed-out homeowners.  No more worthless mortgage-backed bonds. Banks are made whole, consumers are awash in liquidity.  Imagine the shopping spree we could all go on without mortgage payments.  Economic stimulus unleashed!

Unfortunately, our Government will continue to flail around, searching for ideas, implementing half-baked schemes, all with what I deem to be band-aid like impact. The sooner we put together a government-sponsored bankruptcy, for our banking and auto industries, the sooner our economy stabilizes and recovers. For example, the common equity gets blown out, toxic assets are priced to zero, and the good parts of the banks can continue forth while the crummy parts are put to the woodshed. This may even drive some so-called private entities into the mix, finally seeking to parlay some capital for profit as a true price for some of the lousy assets may be found.

But in the meantime, I feel like a sailor, adrift in high seas – rudderless, helpless, longing for a speck of land on the horizon.