Treasury Secretary Tim Geithner cautioned today that, despite the Dow soaring nearly 500 points after the administration announced its plan to get bad assets off of banks' balance sheets, it is far too soon to call the plan a success.
"So let's talk about what you announced today," the Wall Street Journal's Alan Murray asked Geithner at the Journal's Future of Finance Initiative. "The stock market liked it."
"One day does not make a plan successful," Geithner replied.
In a wide-ranging question-and-answer session this evening, Geithner described the challenge of coming up with popular financial programs at a time when people nationwide are outraged by the current crisis.
"Look, we're going through an enormously difficult, complicated financial crisis," he said. "The politics are understandably terribly difficult. People across the country are angry and -- as they should be -- that this economy, the United States of America, got itself in a position where enormous damage has been done as a consequence of a long period of excess risk-taking without meaningful adult supervision.
"And the consequences of that are tragic, because they're basically fundamentally unfair, because people who were careful and responsible, conservative in their decisions, are suffering a lot from the consequences of mistakes they were not part of," he said. "And so you start with a deep sense of public outrage and frustration and some enormously complicated problems."
Even in the face of such public discontent, Geithner outlined how Treasury's latest program, on the heels of other efforts, such as the stress tests for banks, will start thawing out the frozen credit markets.
"We believe we have to provide very substantial forms of financing to help get those markets going again," he said. "This is the next piece of a series of efforts to try to bring that about."
With attractive financing and the promise to match private sector investments side-by-side, Geithner believes Treasury's plan will create a market for banks to offload their bad assets.
"Part of what's making it hard for banks to get rid of this stuff is the absence of a market with financing in which then to sell it," he said. "Now, this is not going to solve all these problems, but in our judgment, it will help -- over time, it will help, in part because it will give them better options for helping bring private capital into their -- into their institutions."
For the plan to succeed, Geithner warned that investors need to take more risks, even though it was excessive risk-taking that caused these problems to begin with.
"We're not going to get through this unless the market is willing to take more risk," he said. "You know, the risk now for us is that, after a long period of people taking, in some ways, risks -- too much risk that they didn't understand, they're taking too little now."