The market is a bit disappointed that Geithner's plan wasn't more concrete. No magical bullets! Darn. Well, it might be of some comfort to know that all the dire things he and Obama are warning about aren't necessarily all that dire in the first place. As this chart shows, Total Bank Credit is only modestly off its recent highs, and remains on a normal, long-term growth path. The M2 measure of the money supply is at an all-time high, and is growing so fast that Milton Friedman would be shouting "inflation!" if he were still alive. Nonfinancial commercial paper is still expanding. Commercial and Industrial loans are still expanding. Credit spreads are gradually declining. The financial world is far from being in miserable shape. Indeed, all key indicators of the financial sector's health have improved significantly since last November.
Would it be so disappointing to learn that maybe we don't need another government rescue package? It seems to me that the best news imaginable would be that a rescue wasn't needed. Same thing with the stimulus bill. It's not going to stimulate anything, it's only going to smother the economy with expanded government programs and greater tax burdens. So it's not surprising that all the market could do to celebrate the passage of the bill was a yawn.
What this economy needs is a tincture of time. It doesn't need a big government embrace, it just needs time to sort out its problems and to reprice assets so that they are once again attractive to hold.