While the world watched Barack Obama take the oath of office yesterday, on Wall Street shares in the big banks plummeted as much as 29% as the markets took the worst pounding in inaugural history. Yet when Tim Geithner appears before a Senate committee today, the incoming Treasury secretary will not be prepared to present a detailed rescue plan. As the New York Times reports, the Obama administration wants to avoid the fate of Hank Paulson, who shifted from one strategy to another as the banking crisis deepened.
Some initiatives have already been announced: Obama wants to provide $100 billion to prevent home foreclosures, while at the same time the Treasury needs to get bad mortgage debt off the banks' balance sheets. Many in Washington are mulling the foundation of a government-backed "bad bank" to take on bad debt. But Washington still faces a fundamental problem: Banks have not been forthcoming about their losses, and the full scale of the crisis remains unknown.