Saw Summers on a cable program yesterday, standing up in front of the White House. He is a terrible spokesman for Obama’s plan, arrogant and unsure of himself at the same time; also not very telegenic.

I really can’t imagine why he’s on the team, unless it’s to keep him from pissing outside the tent. He brings very little to the table, especially considering his liability for the situation we are in today.

Cut Larry loose, Mr President.

[rhetorical question]Is Ambinder on drugs?[/rhetorical question]

Might it be that Geithner’s presentation was deliberately vague about the stress tests so that banks and the markets can brace themselves for it? Both Roubini and Krugman took note that the potential of the stress tests seemed in line for what they had been recommending. Look at how much the market dropped as it was. If Geithner had spelled out the stress test on Tuesday, the results would have been far more dramatic. As for Summers, think in terms of putting an opaque cover on the practical policy the banks think they’re avoiding by compromising the press. He certainly seems to be serving that purpose well.

Summers hasn’t learned anything from being fired from Harvard, has he?

They aren’t really doing stress testing in the formal sense. As I say in a comment on the previous thread, I think what they are doing is marking the portfolios of giant banks closer to current market than the banks are doing, and looking out two years to see if there is some chance of significant recovery in the portfolio.

These are enormous aggregations of capital. The hedge funds and other giant pools of money must be salivating at the thought of capturing the securities at rock bottom prices, which they might if the banks are nationalized and the FDIC or whoever does a bad or corrupt job of liquidation.

While I understand the impulse to stabilize the markets, planning your fiscal policy around how well Wall Street responds is like disciplining your two year old based on how well they like it.

Kimberly Strassel of the Wall Street Journal is on MTP right now saying that Obama needs to stand up to his own party (”left wing, minorities”) if he’s going to be successful. No word on what problems they’re causing relative to those caused by the banking community, or the need to stand up to them.

I did read that. It was very good. Yves Smith says the same thing — calls the stress tests “garbage in, garbage out” activity to placate the public and reassure investors.

For publishing klowns like Ambinder, McArdle, Douthat and the rest,
the Atlantic deserves the slow, embarrasssing and red-ink stained demise
it is now experiencing.

Ding!! new Jane upstairs.

There always seems to be a story behind the story that the public is invited to make sense of. The fact is, that the Chinese as well as the Queen of England have put up the new capital to reflate that banks, but it does come with a string attached. The banks have to be nationalized into new treasury banks thus taking away power from the Federal Reserve as well as the intelligence state within the state that controls the Executive branch.
Whether one chooses to believe the following is a personal choice. But the real story is about control of an out of control intelligence establishment that requires off balance sheet non taxable funds to continue their dirty work around the world while the rest of the world suffers.

Just updated last evening at http://www.worldreports.org

THE SOLUTION
The universal solution to the global systemic financial corruption crisis has been on the table for several years, and was specifically re-approved by the Group of Seven Financial Powers at their summit meetings in 2007 and 2008. The adjective ‘universal’ is applicable because implementation of the agreed-upon solution will, over quite a short space of time, refloat the banks by generating accruals on-the-books, revalidate the US dollar and the US dollar financial system in the process, revitalise the world trading system as a consequence, and shower the US Treasury with ongoing windfall tax accruals which will transform its finances and reverse the centuries-long one-way deficit-financing and debt accumulation route to financial collapse.

Banks will be refloated on balance-sheet very quickly because accruals arising from transparent transactions with the appropriate capital markets instruments as prescribed by the G-7 will cascade into the banks in the form of deposits, transforming the banks’ balance sheets in the process.

This solution, like all truthful and straightforward means of resolving problems, is the essence of simplicity. By contrast, the covert, surreptitious, off-balance sheet, untaxed, secretive, fraudulent derivatives ‘Structured Products’ operations based on worthless assets generating fake yields, are enveloped in a fog of extreme complexity.

WHY THE SOLUTION IS BEING BLOCKED, AND WHO IS BLOCKING IT
Bear in mind that the G-7-Approved Refunding Plan is, as we constantly reiterate, APPROVED by the Group of Seven Financial Powers, which are fighting for their economic survival in the face of the recalcitrance of the American criminal financiers who are holding the whole world to ransom.

As noted above, the SOLUTION has been on the global table for several years and if it had been implemented in 2006/2007, instead of being hijacked by the corrupt Paulson Treasury so that funds could be stolen and the later LOAN monies belonging to the lender(s) abused and exploited, the whole world would not now be experiencing the ‘train wreck’ that we predicted on this website on 2nd September 2006, in December 2006, and in reports published here and in our journal in June and July 2007. We predicted the ‘train wreck’ accurately because we saw then that the corrupt US Treasury had no intention of implementing the G-7-Approved Refunding Programme and that the constant barrage of ‘we’ll pay you tomorrow’ rhetoric, with its innumerable variants, represented a cynical CIA counterintelligence propaganda offensive designed to enable the organised criminal cadres inside the US official structures and their allies to continue trading derivatives, to sustain the bubble of Fraudulent Finance, and to keep the army of outraged protesters at bay indefinitely.

Quite simply, the cloth-ears at the US Treasury preferred to continue down their yellow brick road, enriching themselves and their co-conspirators in the process, under the protection of the corrupt Chicago component of the FBI and the Bush-Clinton organised crime operations – to the general satisfaction of the expanded domestic and international élite that has been so corrupted by this Fraudulent Finance ever since George H. W. Bush Sr., stole the money from Continental Illinois Trust Company in the 1980s.

On ABC’s This Week, Sen. Schumer said Geithner is not planning to nationalize, but he didn’t explain what happens when the testing reveals even more clearly that some banks are insolvent. In contrast, Lindsey Graham said the stress tests will force us to accept nationalization. So we have a Republican recognizing the need and a Democrat in denial.

No on on the show said anything about the fact that 13 banks have already been seized by FDIC this year alone; 25 for all of last year, so we’re on a pace for a couple hundred — all while the talking heads debate about whether it will happen, when it is happening.

I think the facts will lead to increasing nationalization, and whether Geithner is surrepticiously preparing for this or naively trying to avoid it is irrelevant. It’s happening and will expand. And the market can see this; no one is being fooled.

wrt to Schumer, remember that the Republicans jumped all over him when he made a statement that some asserted caused a run on a bank that then failed. He’s the last guy to be saying, “the banks are insolvent.” Instead, he’s going to try to avoid the panic button, even while people are jumping out of windows.

The banks are going to have their books inspected by the government. But isn’t their a law passed after Enron I think that says that a CEO must stand by and sign off on the results of their Accountants?
If the Governments results are different by 5% or more from what the banks say they were is Obama going to use this as an excuse to fire bankers?
Or will he cover for them?
I hope that anti labor Bank of America CEO goes first.

1) The results of the stress tests will not be made public, so where would this “friction” come from, and how would we know about it?

Press Leaks its all Rahm is good for?

I’m hoping that once Obama’s people get the books they double cross the banks and do real audits that might take months.
If the banks disagree then I’m hoping they get kicked out of the bank bailout program.
We have lots of leverage here. I’m hoping Obama is using deception to get what he wants.

Larry Summers is opposed to bank nationalization because he thinks it “Putinesque” and the economics team is largely staffed by people from the banking world who have no interest in standing up to the banking community. Stress testing is deliberately opaque and designed to inspire market confidence, not make the case to Congress for something Geithner is doing everything in his power to keep from doing.

If everything you say turns out to be true then things will get worse. The GOP will say we were right and gain support.
Obama can then choose to go Left or Center.
Hilary made the wrong choice during the campaign she dismissed the anti war vote.
The problem is that any further failure in the economy that the GOP could exploit could destroy the economy.

The health of the banks might not be released because of worries the truth will come out.
BUT the parameters of the audit need to be known o course all bad banks should be taken over by the Feds.
But investors will need to know what a good bank is before they invest in it.
If you want people to invest in the banks again investors need to know what kind of and how much debt due when a bank has.
They need to know that the Government stands by their books before they invest.
I think that the banks accounting firms might end up like Arther Anderson after this government audit.

Government Run accounting firms that guarantee their work will do much better in this instance than private accounting firms that are, well soon to be indicted if the Government audit is worth a Damm.
Heck I predict that if the Government Audit of the banks is Real we will hear rumblings about charges being brought up against those accounting firms.
Without a real audit, without investors knowing that its a real audit the banks wont get investors…and they will not lend to each other either.

That is a very good point.

There are over 700 trillion in OTC derivatives on the books of the banks. Does anyone in their right mind believe that just by wrapping them under the guise of being insured by the Treasury is going to make them anymore palatable for others to buy? Guess again. The banks will be nationalized as there aren’t any buyers for this toxic financial garbage.
As Churchill once said. Americans can be counted on to do the right thing, after they have exhausted every other option.

700 trillion in OTC derivatives

Better to just return the cash to the investors and declare the 700 trillion in OTC derivatives bets illegal the Feds can’t hope to cover them.

I did read that. It was very good. Yves Smith says the same thing — calls the stress tests “garbage in, garbage out” activity to placate the public and reassure investors.

I agree with you, Smith, and ThingsComeUndone, a real audit would show how insolvent the banks are so instead we are being treated to the kabuki of a stress test. Geithner has never been some closet reformer so I take his actions at face value. He is trying to prop up the house of cards, not replace it.

So this Kabuki will not help the banks, reassure investors, etc this Kabuki is all for Washington and Obama’s economic advisers delusions. Great/s

here is a fantastic interview from Fronline and the preface that goes along with it.

I have this feeling in my stomach that I felt in other countries, much poorer countries, countries that were headed into really difficult economic situation. When there’s a small group of people who got you into a disaster, and who were still powerful. Disaster even made them more powerful. And you know you need to come in and break that power. And you can’t. You’re stuck….

The powerful people are the insiders. They’re the CEOs of these banks. They’re the people who run these banks. They’re the people who pay themselves the massive bonuses at the end of the last year. Now, those bonuses are not the essence of the problem, but they are a symptom of an arrogance, and a feeling of invincibility, that tells you a lot about the culture of those organizations, and the attitudes of the people who lead them…

But it really shows you the arrogance, and I think these people think that they’ve won. They think it’s over. They think it’s won. They think that we’re going to pay out ten or 20 percent of GDP to basically make them whole. It’s astonishing….

…these people are throughout the system of government. They are very much at the forefront of the Treasury. The Treasury is apparently calling the shots on their economic policies. This is a decisive moment. Either you break the power or we’re stuck for a long time with this arrangement.”

Bill Moyer’s Journal – Interview with Simon Johnson

Simon Johnson’s Web Site Baseline Scenario

I have been reading this wsite for the last few months. http://www.worldreports.org/news has the back story on what is really going on with the world economy. At first it seemed hard to believe, but the more I read it and how well it is verified with specific details, I think it is required reading by every citizen of the world. We are witnessing the biggest fraud ever perpetrated on mankind. It is very helpful to have the insight provided on the financial and political aspects of the grim reality we are facing. As a progressive it has been hard to understand the appointments of Obama. This site provides clarity even though it is not what I was hoping, I still want to know the truth. I hope Obama sees the light soon and isn’t a part of the conspiracy to defraud the world.

If Geithner thought the banks were insolvent, he could threaten them with real audits which would force them into bankruptcy, receivership, nationalization, or whatever else people want to call the process.

A stress test more or less assumes that the bank is solvent under normal circumstances. I mean why do one if you thought differently? Why not go straight to an audit and bankruptcy? Look at all the banks where this has happened so far. Treasury and the FDIC have not had to go through these Hamlet levels of indecision before. They just go in and close the bank down. Now they are going through all this alas and alack, to close or not to close rigamarole. They could move any time they wanted to. They don’t because they don’t want to, because Obama doesn’t want to.

Or hopefully this bank stress test maneuver will give Obama the cover he needs to fire Bank CEO’s since bank CEO’s do have to certify their results.
This bank Nationalization thing could go much quicker if Obama appointed CEO’s stop Bank lobbying to the GOP on this subject.

2.5 trillion! This is insane.