But it's hopeful, and I think genuinely confidence-enhancing, when a Secretary of the Treasury clearly states how things truly are.
We need to have a clear picture of the real situation, in order to be able to do something effective about it.
So I'm encouraged to hear this 33 minutes into Geithner's interview on Charlie Rose:
Geithner: "...if you look at the amount the American people were borrowing, relative to income, you just had a huge, unsustainable rise in the basic debt obligations of the American people.....
"You know, uh, people borrowed and spent beyond their means..."
This is the basic reality we are dealing with.
All the other descriptions of our current situation that aren't centered on or in recognition of the fact of the credit bubble are either erroneous or beside the point. Even talking about wages is incomplete without an inclusion of the debt picture. Economics is not the entire picture of our lives, but so far as the economic and personal budget side of our lives goes, this is the most crucial fact.
I am reassured about Geithner's understanding of the situation -- that he can recognize and clearly state this central fact of unsustainable debt levels. Yes, we still have to wait to see just how willing the Fed and Treasury and Administration are to deal effectively with zombie banks, but at least there is no delusion about the real situation on the part of the Secretary of the Treasury. Since Geithner clearly understands the full picture (regardless of how he may estimate or misestimate the complexities of receivership), we can reasonably hope he'll correct mistakes and modify plans more quickly than without such an understanding.
Because the currently described plan has some flexibility -- for instance in just how much common stock taxpayers may end up holding in some banks in time -- we can plausibly imagine that the outcome would have some fairness for taxpayers in getting equity in banks (the potential for upside in return for their money). Until I see that we refuse to take a majority stake in Citigroup (for instance when certain guarantees cost us more as time passes), I am not going to presume that we won't "temporarily nationalize" (restructure, etc).
So we still have a possibility that Geithner's plan, or ongoing adjustments, could be a flexible and effective way of dealing with the banks that is good enough, within the context that there is no cheap or easy way out of this mess.