There are two reasons for the sell-off:

1. First of all there's no suspension of mark-to-market accounting rules that I can see (rumors of that caused banks to go up over the last couple days) because the banks would be able to, well, happily lie about their books and go back to pretending the toxic crap they had was worth 97 cents on the dollar rather than 9.7 cents on the dollar.  Wall Street is pissed that this isn't in the plan.

2.  If Iggy is right about the "stress-test" on the financial system and those who fail the test are "nationalized", then there are a whole hell of a lot of small to medium banks that will fail that test at the cost of untold trillions.  Wall Street is also pissed off at this.

So yeah, 300 point selloff today.

More at Zandar vs. The Stupid.

slightly ot, but relevant; the senate passed the stimulus bill...looks like the cloture vote, redux 61 - 37...corny must have voted today.

the revolution will not be televised...

is that what it's called?

Timothy Geithner's speech laying out the Treasury's plan for bailout 3.0 struck us as devoid of key details that might have settled some of the uncertainty and confusion surrounding the Obama administration's approach.

That's how it struck Simon Johnson, the former chief economist for the IMF, too....

That lack of specificity, said Johnson, isn't helping restore confidence, pointing to a sharp drop in the market today, especially in the financial sector. "The market is responding to vagueness," said Johnson. "This is not a plan. In the annals of plan-announcing, this is very vague."...

Johnson had harsh words for the administration's plan, announced late last week, to modestly limit executive compensation. He called it "a joke," and said Geithner had lost credibility because of it. "No one in the markets is buying those [limits] as meaningful."

I'm no economist, but perhaps "proposal" would be a better word for geithner's suggestion.

John Mccain Called his wife WHAT??

Only $50 billion for direct homeowner relief..

That's at least one item that should increased 10 fold at the expense of any non-stimulative spending, depending on how they execute.

Policies like a $15,000 tax credit will create a bubble that will burst when the spending ends. If there was a shortage of interested borrowers, this would be a better policy.

Paying that $15,000 to principal will lower month expenses for millions, stem foreclosures, set reasonable values for mortgages (we need a bottom!), pay itself off over time with reduced mortgage interest write offs and increase the amount of money in the consumer's pocket starting the day it's enacted.

I'd like to see the above not because I blindly like the little guy, but because asset values will be more knowable which would translate directly to more lending of the non-stupid, bubble variety that most of the other stimulus efforts here seem to encourage (unsustainable subsidies = bubble).

The point should not be to buy a year or two and hope everything sorts itself out despite the certainty that the mini-bubbles you've created will eventually burst.


Declaring the bottom is the only way back up..

Booman, I really can't understand why you are so sanguine about what we know right now about the bank bailout.  Every indicator points to some version of a "bad bank" by which taxpayers underwrite losses and bank shareholders reap profits, or a superficially less atrocious alternative that in practical terms will amount to the same thing (i.e., the $250-500 billion plan to "encourage" private investors to buy chunks of the shitpile, which simply cannot work absent gurantees of a floor or some form of insurance against loss at the taxpayers' expense).  If that is what this ends up being-- and every indication thus far is that it will-- it will be awful policy and worse politics.

Unbelievable that someone like Geithner is put in his position... HE NEEDS TO BE REPLACED.  Either he's a crook or an idiot we don't need either running the Treasury.  Obama needs to admit his mistake and replace him.