Breaking Views

Obama's 3 steps to crisis-solving

Speed, setting priorities and a good sell - the grand communicator needs to draw a line in the sand.

By Hugo Dixon, breakingviews.com

(breakingviews.com) -- President Barack Obama shouldn't allow momentary rebounds in stock prices to lull him into a false sense of security. The banking crisis is still alive and kicking.

And so long as his administration and the Congress dither over exactly how to resolve it, other initiatives to lift economic confidence - from fiscal stimulus to monetary easing - are likely to be futile.

The administration has not yet managed to draw a line in the sand. This is largely because it has some broad ideas of a plan, rather than clear blueprints. he two key elements - a stress test of the big banks' ability to weather a severe downturn and a public/private partnership to buy up toxic assets - aren't fully specified.

The failure to resolve the crisis is also a function of Treasury secretary Tim Geithner's struggle to sell what he is doing. Federal Reserve boss Ben Bernanke's articulation Tuesday of at least some of the mistakes that were made gives some hope the financial authorities are coming around to what's needed.

Among these, Obama should recognize three things. First, speed is important. Waiting until the end of April to complete the stress tests and then, potentially, another six months before capital is pumped into banks is far too slow.

It's not just that every month 600,000 more people become unemployed. The deterioration in the economy is sapping the creditworthiness of the banks, making the financial crisis even harder to resolve.

Second, Obama should appreciate that the priority is to declare credibly that the crisis will be coming to an end. The pros and cons of different options - such as temporary nationalization, bad bank regimes, pumping in more capital or guaranteeing assets - do matter.

But what really matters is getting something done that is substantive enough to give the public, industry and banks themselves the confidence that they can function effectively again.

Finally, the president is going to have to sell whatever banking rescue plan his team comes up with. Geithner lacks the communications skills to get an increasingly uppity Congress to write him another check to bail out banks.

The grand communicator, on the other hand, has both the political capital to push unpopular measures through Congress and the ability to persuade the public that at least the banking element of the crisis is over.

Given how the success of his presidency hangs on being able to solve this problem, he had better step up to the plate. To top of page

Company Price Change % Change
Facebook Inc 74.98 3.69 5.18%
Ford Motor Co 17.84 0.06 0.34%
Yahoo! Inc 36.17 1.46 4.21%
Bank of America Corp... 15.62 0.10 0.64%
Apple Inc 97.03 -0.16 -0.16%
Data as of Jul 24
Index Last Change % Change
Dow 17,083.80 -2.83 -0.02%
Nasdaq 4,472.11 0.00 0.00%
S&P 500 1,987.98 0.97 0.05%
Treasuries 2.51 0.04 1.83%
Data as of 5:42am ET
More Galleries
Best-loved cars in America These cars and trucks topped J.D. Power's APEAL survey, which measures how much owners like their new vehicles. More
America's most powerful cars A new 'horsepower war' has erupted among U.S. automakers and these are the most potent weapons in their arsenals. More
A sampling of beers being made with traditional Latin flavors A small but growing number of craft breweries are including passion fruit, Mexican cinnamon and other traditional Latin flavors. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.