Treasury Secretary Timothy Geithner appeared on CBS' Face the Nation yesterday and warned that the economic recovery "is not going to be even. We're going to have fits and starts. There will be a period where it feels very bad and uncertain.” Translation: Lower your expectations!
Geithner also warned that there may be more job losses (last week, unemployment edged up to 8.5%, the highest in 26 years), "The typical pattern of recoveries is that growth recovers, growth starts to turn positive, people start to spend more. Businesses hire more, they invest more, before you see unemployment peak. That's the crude reality of recoveries. [Employment] lags." But he did find the low mortgage interest rates an "encouraging sign," "Millions of Americans now are going to be able to refinance their homes, take advantage of lower interest rates. That's cash in the hands of the American people, and that's very powerful." Translation: Spend!
However, when asked if the Treasury will need to ask for more stimulus funding, Geithner said, "I can't make that judgment at this time. Our first priority is to move on the programs that Congress has passed and put those in place as quickly as possible.” He did say the Treasury might consider removing management and boards of companies who require "exceptional assistance." Translation: Hello, Fritz.
The stock market rally of the past few weeks appears to be tempered by veteran bank analyst Mike Mayo's words today—"While certain mortgage problems are farther along, other areas are likely to accelerate, reflecting a rolling recession by asset clas. New government actions might not help as much as expected, especially given that loans have been marked down to only 98 cents on the dollar, on average." He also said losses will be bigger than Depression levels.
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