These are days of political pantomime in which nothing is happening, but the Obama Administration is busy manufacturing reassuring pictures:
*The President poses with the elected leaders of Pakistan and Afghanistan, who preside over impotent, corrupt regimes, and expresses confidence: “We meet today as three sovereign nations joined by a common goal: to disrupt, dismantle and defeat Al Qaeda and its extremist allies in Pakistan and Afghanistan and to prevent their ability to operate in either country in the future." The news on the ground tells a different story.
*Results of the bank stress tests are leaked in a flood of contradictory interpretations that inspire the stock market to rise as Treasury Secretary Tim Geithner hires a key counselor--to help him persuade the public that the sky is not falling. It may not be, but we have no real way of knowing.
*The White House tells us a line-by-line scouring of the budget is saving $17 billion, but the fine print is that the amount is peanuts and, even so, is not likely to survive special-interest resistance.
Barack Obama promised us an end to "politics as usual"--theatrics and trivia to cover up what is unknown and unknowable--but we are still not ready for a president to tell us he doesn't know exactly what to do about nuclear weapons in a country threatened by murderous extremists or how to get the banks to stop stuffing their balance sheets and start lending again or how to control budget deficits in a time when government spending is needed to give the economy mouth-to-mouth resuscitation.
So we get the usual charades and photo ops. The bottom line may be depressing, but at least we have a relatively smart government looking for answers.
Showing posts with label bank stress tests. Show all posts
Showing posts with label bank stress tests. Show all posts
Thursday, May 07, 2009
Tuesday, May 05, 2009
The Bank Stress Test Hustle
The process may tell us as much as the results, which are finally due later this week after many false starts.
The delays themselves indicate the government is negotiating stress-test grades with the recipients, and now a series of leaks has economists worried about the manipulation that is going on. What kind of truth will we see in this hall of mirrors?
Two headlines in the Wall Street Journal today encapsulate the doubts and fears: "More Banks Will Need Capital" and "We Can't Subsidize Banks Forever."
The latter proposes that banks be forced to sell all toxic assets, rather than cherry-pick them for cosmetic purposes, and that the government take tighter control in return for bailouts:
"(T)he government should stop providing capital, loan guarantees and financing with no strings attached. Banks should understand this. When providing loans to troubled companies, they place numerous restrictions, called covenants, on what these firms can do. These covenants generally restrict the use of assets, risk-taking behavior, and future indebtedness. It would be much better if the government focused on this rather than on its headline obsession with bonuses."
Meanwhile, as they always do, banks are paying off their shareholders while starving depositors with close-to-zero rates on their money.
A new study shows that "banks only marginally reduced dividends in the first 15 months of the crisis, paying out a staggering $400 billion in 2007 and 2008. While many banks have been reducing their dividends more recently, bank bailout money had been literally going in one door and out the other."
Among the big banks that will be at the government trough again after test results are announced will be Wells Fargo, partly owned by Warren Buffett, who at his stockholder meeting last week touted its strength and wished that he were legally allowed to own more of it.
Maybe the government should find a way to let that happen. Better him than us.
The delays themselves indicate the government is negotiating stress-test grades with the recipients, and now a series of leaks has economists worried about the manipulation that is going on. What kind of truth will we see in this hall of mirrors?
Two headlines in the Wall Street Journal today encapsulate the doubts and fears: "More Banks Will Need Capital" and "We Can't Subsidize Banks Forever."
The latter proposes that banks be forced to sell all toxic assets, rather than cherry-pick them for cosmetic purposes, and that the government take tighter control in return for bailouts:
"(T)he government should stop providing capital, loan guarantees and financing with no strings attached. Banks should understand this. When providing loans to troubled companies, they place numerous restrictions, called covenants, on what these firms can do. These covenants generally restrict the use of assets, risk-taking behavior, and future indebtedness. It would be much better if the government focused on this rather than on its headline obsession with bonuses."
Meanwhile, as they always do, banks are paying off their shareholders while starving depositors with close-to-zero rates on their money.
A new study shows that "banks only marginally reduced dividends in the first 15 months of the crisis, paying out a staggering $400 billion in 2007 and 2008. While many banks have been reducing their dividends more recently, bank bailout money had been literally going in one door and out the other."
Among the big banks that will be at the government trough again after test results are announced will be Wells Fargo, partly owned by Warren Buffett, who at his stockholder meeting last week touted its strength and wished that he were legally allowed to own more of it.
Maybe the government should find a way to let that happen. Better him than us.
Subscribe to:
Posts (Atom)