Is that it? Markets greeted the unveiling of Treasury secretary Tim Geithner’s grand plan to save the financial system with disdain. The Dow Jones industrial average tumbled during his speech, continuing to fall more than 350 points by early afternoon. The dollar and Treasuries rallied. Market vacillations should not, of course, be the ultimate test for policy. But this was a golden opportunity for the Obama administration to wow investors, policymakers and the public with its forceful, new approach. It failed.

The apparent dearth of silver-bullet thinking, despite the plan’s billing, was unfortunate. Admittedly, leaks of key elements stole Mr Geithner’s thunder. But, ultimately, on the consumer and business lending side the Treasury is quintupling an as-yet-unproved programme (the term asset-backed securities loan facility), the execution of which still requires further details. Elsewhere, aspirations for a public-private investment fund for noxious assets raises the same old vexing questions relating to pricing and taxpayer protection.

The public craved clear action but were offered soundbites over substance. The “stress test”, which will be mandatory for banks with over $100bn in assets (a select group of about 14), is confused. The Treasury remains unprepared to face the uncomfortable reality that some of banking’s big beasts and best brands are insolvent. A real test of capital positions would support the logic that failures (even large ones) should be recapitalised in government hands or closed down and their deposits sold. Instead, it seems, another round of preferred equity injections is on its way – convertible into common equity this time, though only it appears at the behest of the banks themselves.

Mr Geithner correctly identified that policy has for five months chased an escalating crisis. The administration’s inability to regain the initiative is depressing. This plan represents the start of another round of initiatives. They may prove fruitful. But this, for now, feels like another setback.

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