Tim Geithner and Ben Bernanke are still parroting Wall Street’s take on the meltdown–that it’s a “liquidity crisis,” not a “solvency crisis.”
We are ready to believe that Tim Geithner may believe this: He developed his thoughts about the crisis while meeting with Wall Street kingpins last fall, before those kingpins had been deposed and when Wall Street was more effectively maintaining the fiction that the crisis was about “liquidity.”
But Ben Bernanke? Can a man of his talents and experience really believe that plummeting house prices are just a “temporary dislocation”?
In any event, Tim Geithner has now put forth a housing plan based on the premise that the 25%+ price collapse in the housing market we’ve seen so far is just a temporary dislocation and not a violent reversion to the mean. If only we can get strapped homeowners through the next couple of years, the Geithner thinking apparently goes, house prices will come roaring back and bail everyone out again.
So we ask: Tim Geithner, what part of this chart don’t you understand?