Bear prowls as Wall Street not sold on stimulus plan

NEW YORK -- Twelve weeks ago, Wall Street was cheering President Obama's "economic dream team," hailing it as the gold standard in business acumen. But after a few high-profile missteps, the honeymoon is over.

Announcements about who would be in charge of Obama's economic strategy at first sparked powerful stock rallies on optimism a new direction would help snap the economy out of its slump and boost confidence in banks. However, details of the stimulus and bank bailout didn't live up to Wall Street's lofty expectations. The result: Sell-offs have left stocks near bear market lows.

The once-unwavering confidence in the group's ability to stem the worst economic slide since the 1930s has taken a hit. Rising skepticism centers around whether Obama's $787 billion stimulus package, which he is scheduled to sign into law today, has the right ingredients to jump-start the economy.

Treasury Secretary Timothy Geithner's inability last week to spell out a detailed plan to rescue the banking system also has done little to instill confidence, since it was reminiscent of mistakes made by Geithner's predecessor Henry Paulson when rolling out the $700 billion bank rescue plan.

"The concern is that they are not much better than the Bush team," says Edward Yardeni, chief investment strategist at Yardeni Research. The key players on the Obama team are Geithner and Lawrence Summers, Treasury secretary under President Bill Clinton, who serves as director of the National Economic Council. Former Federal Reserve chief Paul Volcker is also a top adviser.

The market's concern with Obama's team is clear in recent research reports from Wall Street and academia. A piece by David Kotok at Cumberland Advisors is titled, "Washington Seems in Disarray." Economics professor Sung Won Sohn at California State University headlines a report: "Will the Stimulus Program Work?"

Geithner's inability to instill confidence in the government's plan was a setback. "He needed to present a crystal-clear vision of his plan," says Don Luskin, chief investment officer at Trend Macrolytics. "His plan was no plan at all, just … vague promises." To restore trust, he says, Obama's team must "provide operational details for all the things they promised they would do."