Writing on the Wall

As one who hath drank the Obama Kool-Aid, I was a little shocked by the Geithner testimony and plan and fully fell victim to the day's "lack of details" talking line that permeated all news shows. However, while the insolvency debate is a convoluted one on which I don't have all the facts, I had my light bulb moment regarding nationalization while reading over Geithner's plan again and a number of comments made by Obama officials in the past week...I now believe there is a plan.

I began volunteering with a grassroots Obama group right after the Dem primary was finishing up, and I was amazed at the plan outlined by a campaign official at one of those first meetings. So many factors like the message discipline of 'No More Bush', hope and change, and not getting too dirty were held to like religion. Focusing intensly on fundraising through the internet and grassroots mobilization of volunteers to swing districts (we were told from day one that as New Yorkers we would be deployed to Pennsylvania). Even targeting a single electoral vote in Nebraska (which they eventually won) was clearly outlined. The intense discipline was astounding and throughout the campaign, even as polls shifted and others doubted. There were many crossroads where the punditry complained that Obama "did not win the day" which always appeared to me to be a ridiculous sentiment. However, don't get caught up in the day-to-day appeared to be the mantra; focus on the bigger picture.

Watching CNBC has began to be a cringeworthy exercise, as a hungover-looking and angry Maria Bartiromo constantly yells about how "the Dow is down 400, the market hates Geithner's plan". I was at first a little surprised by this 'lack of detail' as the meme went, and began to wonder myself as to how there wasn't any bold, clear course of action after a month's worth of supposed preparation.

 Then in the past few days, as there has been a coordinated message from the entire political world: some form of nationalization isn't off the table. Obama and Geithner's original resistance was somewhat weak-willed I felt. The more I have read about 'stress tests', I now believe they are just an euphemism for "yeah, we know things are fucked up, we just dont want to completely freak you out and fake having a ready solution, Hank-style" and some form of nationalization is already in the works as we await the results of these 'stress tests'. As much as the 'market' didn't like Geithner's original questioning and plan, I think he realized the utter disaster that Hank Paulson's piecemeal approach wrought on markets (We'll buy toxic assets, no we'll capitalize banks, oh yeah, buy some assets, etc.). If a longer-term nationalization of sorts is in the works, there was no reason to indicate that this is the intention if the specifics have not been worked out. So what that the Dow was down 400, in the past six months that's become a blip on the radar, not a black swan. Lawrence Summers even said:

The president has really asked us all to focus on the medium term, the long term, not to focus on market movements on a day to day basis, that’s not really the test we’re going to apply in judging whether this plan works.

Suddenly the word nationalization is on everyone's tongue, from the usual suspects like Krugman to GOP old-timers like Lindsey Graham. The more the establishment and American people become okay with this idea, and read articles talking about how the Resolution Trust Company worked in the S&L crisis, I believe it will soon be made apparent that there will be some level of a large-scale nationalization of insolvent banks. Maybe I have drank too much of the Kool-Aid and the administration really has no idea what their eventual plan is. However, while the punditry continues on with "First Month Report Cards" and the actual solvency is a heavily debated topic on which I don't have all the numbers, I believe a carefully crafted nationalization plan and related press narrative is slowly in the works. And now....we wait.