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2009.04.24
Are they making this up as they go along?
The long anticipated first release of the bank
stress test methodology and results announced today was a big
disappointment. Many people believed that the Administration and the Fed
would finally release some valuable information about the health and financial
status of the largest US banks. However, the information released
today was meaningless as many analysts had predicted. Shortly after
the intent to conduct the stress tests was announced, many analysts pointed out
that the government had painted itself into a corner. If the stress tests
conditions were too lenient it would be viewed as another attempt to lie to the
citizens at worst and to mislead the population as to the severity of the true
financial condition of the banks at best. On the other hand if the
conditions set for the stress tests were too stringent how could they possibly
release any of this information to the public without causing the stock prices
of all the weak banks to immediately plunge as well as lead to an
immediate run on their deposits? This was truly a no-win
proposition. I doubt that anyone really thought this through. It is
as though, in their rush to be seen as doing something, they jumped at the first
idea proposed without much debate. This is often the result of group-think
during a stressful situation.
President Calvin Coolidge once remarked: "You
cannot do everything at once but you can do something at once." It seems
that Bernanke and Geithner (as well as Paulson before him) are just trying any
idea proposed to them (or originated by them) to try to start the debt spiral
going again. The problem is that they are focused on the wrong
problem. The never-ending growth of debt and money is a Ponzi scheme whose
end-time has come. The debt pyramid is collapsing. Instead of trying
to fight this inevitability they should instead be trying to clear the system of
corruption and fraud so that it can heal itself over time. We will
eventually get out of this mess but I believe that the amount of debt in the
world will be greatly reduced before we recover. The policy makers and
regulators should be using the authority of the FDIC to immediately take over
and restructure failed banks. In addition they should empower the SEC,
CFTC and FBI to uncover and prosecute anyone who committed fraud in
the time leading up to and since the credit collapse.
Instead of searching for and outing the truth
Bernanke and Paulson were in fact concealing the truth which is an indictable
offence. New York Attorney General Andrew Cuomo is one of the few
regulators who has the courage to pursue the truth. Please read the
following testimony (under oath) by Bank of America Chairman and CEO Kenneth
Lewis from yesterday's Wall Street Journal:
Another article of interest is from the Wall Street
Journal entitled: "Welcome to America, the World's Scariest Emerging Market" and
is found here
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Comments
I am following your articles, but I have one question, is all this depressing news good for anyones heart? If you are in a safe position financially, why don't you find something more cheerful to do, Gerry? Just concerned for your well being. Miriam
Posted by: Miriam | 2009.04.24
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