If you search for "transparency" in Google News this morning, the first result is Treasury Secretary Timothy Geithner's speech on the Financial Stability Plan. As we know, the markets started dropping as Geithner spoke, and they continued to decline, ultimately reaching about a five percent decline. Pundits are blaming the lack of detail in the Plan, but the problem is not just uncertainty over the details. Rather, the problem is that the lack of details reveals that Geithner is still searching for an answer. As the W$J observed, "Investors naturally took [the lack of detail] to mean that, much like former Secretary Hank Paulson, Mr. Geithner will be making things up as he goes along."

"Transparency" is front and center in Geithner's Plan. He wants the banks that receive federal money to be accountable to the public. The problem with transparency is obvious: the public is skittish, and every scent of bad news brings an immediate adverse reaction. Thus, banks that might otherwise be inclined to seek government assistance could hold back, just like people delay in making a dentist appointment when they are afraid they have a cavity.

As of yesterday, Geithner has his own experience with the perils of transparency. Last week, when the Obama Administration was raising hopes for the plan, markets responded with increasing stock prices precisely because people assumed that Geithner had something really wonderful in development. Now that we see he is improvising -- even worse, improvising without heeding lessons already learned -- the markets are in retreat.

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