Karen Tumulty twitters, "GOP Congressman Connie Mack is on CNN calling on Geithner to resign. Message undercut by screentag showing Dow up 288 pts."I'm no Connie Mack fan, but I'm not comfortable letting the Dow's reaction stand as the arbiter of success or failure. Dean Baker wrote a prescient post on this subject last night:Suppose Timothy Geithner announced a new program that would tax every family $10,000 dollars and give the money to Wall Street banks and hedge funds. (Any resemblance between this hypothetical program and real world programs is purely coincidental.)We would expect the stock of Wall Street banks and other financial sector firms to rally based on the anticipation of higher profits. Is this good for the economy? It's not in any obvious way. After all, we can always tax people more to raise profits for Wall Street, but that doesn't help the economy.Reporters should remember this when assessing Wall Street's response to the plan proposed by Geithner for buying bad assets from banks. The larger the subsidy, the better the news for Wall Street. It's not clear that most of the public should be happy about seeing more of their tax dollars going to Wall Street.
There's much that enters into a stock market rally, but little is more directly correlated to enthusiastic trading than the prospect of making money. And no one doubts that this plan offers private investors an almost historic opportunity to make money. It may be that the plan is also the correct salve for the economy, or it may be that the plan is a good opportunity for investors that will fail the broader economy. But when you're offering this direct of a subsidy to Wall Street, I don't know that you can intuit much from Wall Street's reaction besides the fact that they're thrilled with the subsidy.
