There was a certain mood hanging in the air all day yesterday, as the market rallied 7%. It wasn’t euphoria, really. It was relief. Relief that finally, after all these attempts to fix the banking system, Geithner had finally come out with a proposal big and robust enough to get the job done. To rid banks of their awful toxic assets once and for all.
But yesterday felt very familiar, like that day back in October, when CNBC broke the news that Hank Paulson was cooking up some grand new, RTC-like program to rid banks of their toxic assets and put the whole mess behind us. The market was tanking, but by the end of the day it ended strongly up.
Relief. Relief that finally, the government was biting the bullet and taking care of it all. It seemed big and ambitious enough at the time. Who knew it would be such a belly flop? And bear in mind, too, that the TARP was not the first of many schemes, but what was thought to be the last of a number of government actions designed to fix the mess.
Bottom line. We’ve been hear many times before, thinking that we’ve finally seen the bottom and taken the necessary steps to put it all behind us. We haven’t.