Blog on the Run: Reloaded

Saturday, November 28, 2009 1:39 pm

RIP: Mark Pittman

Once in a while, journalists come across stories they really, really hope to be wrong about but, unfortunately, aren’t.

Mark Pittman of Bloomberg may have dug up the mother of all such stories:

A former police-beat reporter who joined Bloomberg News in 1997, Pittman wrote stories in 2007 predicting the collapse of the banking system. That year, he won the Gerald Loeb Award from the UCLA Anderson School of Management, the highest accolade in financial journalism, for “Wall Street’s Faustian Bargain,” a series of articles on the breakdown of the U.S. mortgage industry.

“He was one of the great financial journalists of our time,” said Joseph Stiglitz, a professor at Columbia University in New York and the winner of the 2001 Nobel Prize for economics. “His death is shocking.”

Pittman’s fight to make the Fed more accountable resulted in an Aug. 24 victory in Manhattan Federal Court affirming the public’s right to know about the central bank’s more than $2 trillion in loans to financial firms. He drew the attention of filmmakers Andrew and Leslie Cockburn, who gave him a prominent role in their documentary about subprime mortgages, “American Casino,” which was shown at New York City’s Tribeca Film Festival in May. …

“Who sues the Fed? One reporter on the planet,” said Emma Moody, a Wall Street Journal editor who worked with Pittman at Bloomberg. “The more complex the issue, the more he wanted to dig into it. Years ago, he forced us to learn what a credit-default swap was. He dragged us kicking and screaming.”

The American financial media in general, obsessed as they are with power and personalities, didn’t see this storm coming until it was too late. Mark Pittman did, and hundreds of billions of evaporated wealth might still be here if his colleagues had followed his lead sooner.

Pittman, 52, leaves a wife, three daughters, his parents and two brothers.



Friday, October 30, 2009 7:58 pm

Odd and ends for 10/30/09

  • Gina Barrera, author of a book on revenge, on the Chronicle of Higher Education’s “Brainstorm” blog, on her appearance on “The Dr. Phil Show” (which aired Wed 10/28): “Hey, it’s television, not NPR. There was emotion, not aphorisms interrupted with reed music.”
  • “Born in the USA,” 25 years later.
  • Mother of all map pr0n: “The Fourth Part of the World,” by Toby Lester.
  • I know every generation says the younger generation is going to hell, but here we may have objective proof. Quasi-related quote from Doug at Balloon Juice: “… the politicians and pundits who stand by and watch millions of lives destroyed by our health care system — are they any better than the people who watched that horrible crime in Richmond? I think you know the answer.”
  • Introducing a new feature here at Blog on the Run: Reloaded: Stuff I’m Finished Arguing About. Our first entry: Rush Limbaugh is indeed a racist.
  • He campaigned on more government transparency, but Barack Obama, our ostensibly Constitution-loving president, is going the obstruction-of-justice route just like his predecessor.
  • My former employer’s Pet-Halloween-Costume contest is over, and you can see all 50 entries here. I think my favorites are the devil dog and the Reservoir Dogs.
  • Questions 31 and 32 of this poll by Fox News are pretty funny. Question 31 asks, “Have you heard about the Obama administration’s criticism of Fox News Channel?” 59% have, 40% haven’t. (The poll doesn’t ask about Fox’s criticism of Obama.) Of those who have, 56% think Fox News is right, 29% think Obama is right. Now think about that: A group that has heard about it is disproportionately likely to be Fox viewers, since Fox is the only news outlet making any kind of big deal about this. And yet just more than half think Fox is right, and fully 3 in 10 think Obama is right. That’s hilarious.
  • Time was, lying to Congress was a crime. Oh. Wait. It still is. So’s perjury. So lock this guy up.
  • Taylor Mitchell, Canada’s up-and-coming answer to Taylor Swift, was killed by coyotes this week while hiking in a national forest. And this wasn’t even like the case of Timothy Treadwell, the documentary filmmaker who spent so much time among Alaskan brown bears that they finally got tired of him and ate him. She was walking just where lots of other people walk all the time. Sad.
  • “I don’t think it’s the government’s place to interfere or set limits or regulations on executive pay,” said Chris Gurkovic, chief market strategist at Deltatide Capital in Jersey City, New Jersey. “If someone is going to take the risk they should be compensated for it.” That’s a fine idea, Chris, especially since these days it’s the taxpayer taking all the risk.
  • Not only is the maker of Tasers now admitting they can be lethal, the courts have decided to start holding cops responsible when they tase someone excessively and he dies. At least in civil court. This cop still should have been looking at a manslaughter charge, minimum.
  • And finally, our quote of the day, from commenter Rayne at FireDogLake: “Seriously, except for the locale, Palin is just one big work of fiction Hiassen hasn’t yet written.”

Thursday, September 24, 2009 6:17 am

Shorter Paul Volcker

Ur not doin it rite, n00bs!

View this document on Scribd


Sunday, September 20, 2009 3:59 pm

Special treatment

Filed under: I want my money back. — Lex @ 3:59 pm
Tags: , ,

A longtime Wall Streeter explains why the bonuses are only the beginning of the special treatment that banksters at bankrupt firms received … and offers some cogent, logical suggestions on how they ought to be treated going forward. Hint: Just like similarly situated executives at any other bankrupt firm, with an additional proviso that would force them to, in his delicious phrase, “eat their own cooking.”

Thursday, July 23, 2009 8:39 pm

If we have to use tax money to bail out private businesses …

Filed under: Fun — Lex @ 8:39 pm
Tags: ,

… could we stop bailing out banks and start bailing out enterprises that actually do some good in the world?

(h/t: Michael Pope on Facebook)

Wednesday, July 22, 2009 8:26 pm

535 members of Congress …

Filed under: I want my money back. — Lex @ 8:26 pm
Tags: , ,

… and approximately one of them appears to be working in the best interests of the taxpayer at the moment: my current political hero, Rep. Alan Grayson of Florida:

Tyler Durden of Zero Hedge calls the play-by-play:

  • At minute 1:30, Bernanke can’t say which financial institutions got the money.
  • At minute 3:19, Bernanke says that the 30% rise in the dollar which took place at the same time as the Federal Reserve lent out $500B to foreign central banks was just a coincidence.
  • At minute 3:45, Bernanke and Grayson discuss the Constitutional basis for the Federal Reserve lending a half a trillion dollars to foreigners

Wednesday, June 24, 2009 10:14 pm

That plow’s gonna get a workout

Filed under: I want my money back. — Lex @ 10:14 pm
Tags: , , ,

First Goldman, now Citi:

Citigroup Inc., the U.S. bank that got $45 billion of government funds, will raise base salaries by as much as 50 percent to help compensate for a reduction in annual bonuses, a person familiar with the plan said.

The biggest increases will go to investment bankers and traders, said the person, who declined to be identified. Workers in consumer banking, credit cards, legal and risk management will see smaller salary adjustments. The New York-based company also plans to award stock options to try to keep employees after Citigroup’s market value plummeted 84 percent in the past year.

Citigroup joins Morgan Stanley and UBS AG in boosting salaries for executives and employees. Morgan Stanley said last month it will increase base pay for many of the New York-based firm’s top executives and double the pay of Chief Financial Officer Colm Kelleher.

Well, sure, because the last time a company I ran lost $28 billion in one year and sucked $45 billion from the taxpayers’ teat, I got a 50% raise, too.

I oppose eliminationist rhetoric, so I’ll have to make do with thoughts of torches and pitchforks and “Let them eat cake.”

The same people who blew up the economy want us to take their advice on economic reform

Filed under: I want my money back. — Lex @ 8:24 pm
Tags: , ,

… for which I have six words: not just no, but hell, no:

There are an array of reports today outlining the steps that the banking and financial services industries are taking to gum up various aspects of the plan to beef up Wall Street regulation.

There’s a new industry group — the Financial Instruments Reporting and Convergence Alliance (FIRCA) — fighting an accounting rule change meant “to end a practice that contributed to the risky lending that set off the financial crisis.” Hedge funds, organized into the Managed Funds Association, are mobilizing “money and power to fend off tougher oversight, higher taxes and much greater transparency.”

And of course, banks are continuing to raise a stink about the Obama administration’s plan to create a new consumer protection agency. All of which makes this report from the Research Department at the International Monetary Fund (IMF) (via The Stash) extremely timely.

The paper shows that the financial firms that did the most lobbying from 1998 to 2006 also had lower lending standards, a greater tendency to securitize, a larger presence in areas that are suffering the most from loan delinquencies, and ultimately lost the most money during the financial implosion. The researchers concluded that financial sector lobbying of this sort poses a threat to economic stability and increases systemic risk:

[The results] tend to support a theory of “moral hazard” whereby financial intermediaries lobby to obtain private benefits, making loans under less stringent terms not because they have better capacity to evaluate risks associated with the loans, but because they expect short term gains from these loans during the boom phase, and to be bailed out when losses amount during a financial crisis. These results…provide indirect evidence that lobbying might have the potential to threaten financial stability and contribute to systemic risk.

Of course, no one could have possibly seen that coming.

Monday, June 22, 2009 8:25 pm

The chair will now entertain a motion …

Filed under: I want my money back. — Lex @ 8:25 pm
Tags: ,

… to plow Goldman Sachs under and then to salt the furrows so that nothing ever grows there again, because these are not the “green shoots” we need:

Staff at Goldman Sachs staff can look forward to the biggest bonus payouts in the firm’s 140-year history after a spectacular first half of the year, sparking concern that the big investment banks which survived the credit crunch will derail financial regulation reforms.

A lack of competition and a surge in revenues from trading foreign currency, bonds and fixed-income products has sent profits at Goldman Sachs soaring, according to insiders at the firm. …

In April, Goldman said it would set aside half of its £1.2bn first-quarter profit to reward staff, much of it in bonuses. It is believed to have paid 973 bankers $1m or more last year, while this year’s payouts are on track to be the highest for most of the bank’s 28,000 staff, including about 5,400 in London.

Critics of the bonus culture in [London] said the dominance of a few risk-taking investment banks is undermining the efforts of regulators to stabilise the financial system.

Vince Cable, the Liberal Democrat treasury spokesman, said: “The investment banks more than any other institutions created the culture of excessive leverage, excessive risk and excessive bonuses that led to the downfall of the financial system. Now they are cashing in and the same bonus culture has returned. The result must be that we are being pushed to the edge of another crash.” …

Until the release of its first quarter profits in April, it seemed inconceivable that a firm owing the US government $10bn would be looking to break all-time records in 2009. …

Last week, the firm predicted that President Barack Obama’s government could issue $3.25tn of debt before September, almost four times last year’s sum. Goldman, a prime broker of US government bonds, is expected to make hundreds of millions of dollars in profits from selling and dealing in the bonds.

So not only did Goldman Sachs help create our current financial clustermess, not only did its alumni in government help it to survive at the expense of rivals, it’s now poised, with major competitors having been knocked off, to take a big cut out of the tax money Americans are spending to clean up the mess it itself made.

The chair rules that the motion carries by acclamation.

Tuesday, June 9, 2009 9:20 pm

Well, if, by “national hero,” you mean “self-dealing jerkwad who got us into this mess in the first place” … and, by the way, does your mom know you’re smoking all that crack?

There actually is someone in the world, a guy named Evan Newmark at the Wall Street Journal, who considers former Treasury Secretary Hank Paulson a national hero who has saved the economy.

I’ll wait a minute while you stop laughing.

OK. No, really:

I said it last October and I’m sticking by it. And now, there’s actual evidence to back me up. The TARP bailout worked. The Wall Street crisis is over.

At least, the market thinks so. At around 30, the VIX, the market’s volatility barometer, is trading at less than half the average level of last autumn. A share of Morgan Stanley is trading more than 400% higher than its October low.

And by this coming Sept. 15, the first anniversary of the fall of Lehman Brothers, five of the original eight TARP banks will have repaid the American taxpayer $50 billion plus interest.

Don’t get me wrong. The economy is still in crummy shape. But, at least it’s functioning. Not too long ago, we fretted over TARP banks collapsing. Now, we worry about getting full value for our warrants in the same banks.

In an excellent piece published today, my WSJ colleague Peter Eavis grumbles about the measly 5.6% returns earned by taxpayers off their investment in the top 16 TARP banks.

But Paulson’s intent for TARP wasn’t just to make money for the taxpayer. It was to stabilize the credit markets and save the banks at the lowest possible cost.

And that’s exactly what TARP has done. Who can doubt the amazing recovery of the credit markets? The best performing asset class so far in 2009 has been distressed debt, up by nearly 40%.

And the banking system? Investors are now throwing money at it. In May, $85 billion of fresh capital was raised by TARP banks. Bank of America alone has raised $33 billion in capital since the start of the year. …

Of course, everybody in Washington and on Wall Street, got all excited when Obama came to town. The collective wisdom was that both Paulson and his TARP were failures. And the incoming Treasury Secretary duly promised all sorts of new-fangled programs like the PPIP.

But what did Geithner end up doing?

Basically, what Paulson had done before. The TARP. Yes, the Treasury dressed the TARP up with the rigor of the “stress tests,” but at its core Geithner’s primary policy is the TARP.

Nothing wrong with that. If something works, it works. Just give credit where it’s due. And that would be with Hank Paulson, national hero.

Good God, where to start. Well, how ’bout with this: The fact that Geithner is doing the same thing Paulson is doing does not automatically mean that what Paulson was doing was right.

Second, the banks in general are not nearly as healthy as has been reported; they simply were able to game the system to make it look that way:

Analysts who have examined the quarterly profits and government tests say that accounting rule changes and rosy assumptions are making the institutions look healthier than they are.The government probably wants to win time for the banks, keeping them alive as they struggle to earn their way out of the mess, says economist Joseph Stiglitz of Columbia University in New York. The danger is that weak banks will remain reluctant to lend, hobbling President Barack Obama’s efforts to pull the economy out of recession.

Citigroup’s $1.6 billion in first-quarter profit would vanish if accounting were more stringent, says Martin Weiss of Weiss Research Inc. in Jupiter, Florida. “The big banks’ profits were totally bogus,” says Weiss, whose 38-year-old firm rates financial companies. “The new accounting rules, the stress tests: They’re all part of a major effort to put lipstick on a pig.”

Further deterioration of loans will eventually force banks to recognize losses that their bookkeeping lets them ignore for now, says David Sherman, an accounting professor at Northeastern University in Boston. Janet Tavakoli, president of Tavakoli Structured Finance Inc. in Chicago, says the government stress scenarios underestimate how bad the economy may get.

(Then there’s the strong possibility that we could be seeing a new wave of residential foreclosures later this year when another big round of ARMS resets. And that doesn’t even get into the commercial real-estate market, which no one even seems to be talking about.)

Third, we knew even at the time that the stress tests were nowhere near as rigorous as they needed to be. They presumed, for one thing, a worst-case unemployment scenario in 2009 of 8.4 percent. And what was May’s unemployment figure? 9.4 percent. Whoops!

Fourth, yeah, banks are able to raise capital now, but only because investors are confident that if the banks run into any more trouble the feds will just bail them out again instead of nationalizing them, fixing them and selling them off again like they should. (Also, there’s reason to believe that at least in the specific case of Bank of America, that raising of capital wasn’t necessarily completely clean, although I’ll grant I’m not sure how relevant that is to the larger issue.)

Fifth, there’s the role of Paulson himself. Take it away, Matt Taibbi:

Exactly what part of Paulson’s record is heroic, Evan? The part where he called up SEC director William Donaldson in 2004 and quietly arranged to get the state to drop capital requirements for the country’s top five investment banks? … After that, it was party time! Bear Stearns in just a few years had a debt-to-equity ration of 33-1! Lehman’s went to 32-1. By an amazing coincidence, both of these companies exploded just a few years after that meeting, and all of the rest of us, Evan, ended up footing the bill, thanks to a state-sponsored rescue of Bear and a much larger massive bailout of Wall Street in general, necessitated in large part by the damage caused by the chaos surrounding Lehman’s collapse.

Meanwhile your own Goldman, Sachs ended up with a 22:1 debt-to-equity ratio a few years following that meeting, a number that would have been much higher if one didn’t count the hedges Goldman bought through a company called AIG. Thanks in large part to Paulson’s leadership in his last years as head of Goldman, the company was so massively over-leveraged that it would have gone under if AIG — which owed Goldman billions when it went into its death spiral last September — had been allowed to collapse. But thanks to Hank Paulson, who heroically stepped in and gave AIG $80 billion the same weekend he allowed one of Goldman’s last key competitors, Lehman, to collapse, Goldman didn’t have to go without that money; $13 billion of the AIG bailout went straight to Goldman. So I guess we have Paulson to thank for the fact that he used about $13 billion of our taxpayer money to essentially bail out his own [screw]ups. …

Maybe it was the way Paulson pronounced the subprime fallout “contained” in 2007 and called the economy the “strongest in decades?” Or maybe it was the way he remained calm last July, saying that it was a “very manageable situation” and “our regulators are on top of it?” Remember how he said all that [stuff], Evan, just about six weeks before the world exploded? Remember that Henry Paulson was actually in charge of regulating the financial environment during the last years of the crisis and did nothing as his buddies on Wall Street built one gigantic mountain of leverage after another, gashing underwriting standards across the board, saddling the country with a generation of toxic assets that all of the rest of us will be paying for in taxes (instead of, for instance, a health care program, which we can now no longer afford) for the next fifty … years? Do you remember that part? …

Maybe it was that. Or maybe it was the way Paulson got a $200 million tax deferral thanks to an obscure rule that allows executives who join the government to defer taxes on their holdings. That means that not only did Paulson use billions of our money to bail out his own mistakes, he managed to use a loophole to get out of paying his fair share of that same bailout.

Even if it weren’t about five years too early to make any kind of judgment at all about whether or not TARP helped, the notion that Henry Paulson is a hero is complete and utter madness because TARP would never have been necessary if someone, anyone, who wasn’t a greed-addled incompetent like Paulson had actually been regulating the economy in the last years of the Bush adminstration.

I understand that the WSJ op-ed pages and blogs are dedicated to propagating a wide variety of opinions (ahem). But is it asking too much that those opinions at least be based on facts that apply in this dimension?

Apparently so.

UPDATE: Taxpayers, the banks’ TARP repayments may well mean just another screwing:

Through cheap loans, debt guarantees and a promise that big banks will not be allowed to fail, these officials say the government has created an artificial environment in which profits and stock prices have rebounded, helping banks in recent weeks to raise about $50 billion from private investors.

The money allows the strongest banks to return federal aid provided at the peak of the fall financial crisis, but few banks have expressed eagerness for the government to end the other forms of support, creating concern that these programs will be habit-forming and more difficult to terminate.

As a result, independent experts warn that the government’s relationship with the industry is entering a precarious new phase. As with mortgage giants Fannie Mae and Freddie Mac, the government will no longer share in the banks’ profits, but it still stands ready to absorb losses.

“It’s good from an individual investor point of view, it’s great for the banks, but from a system point of view it’s very dangerous,” said Simon Johnson, a Massachusetts Institute of Technology professor and former chief economist at the International Monetary Fund.

See, the thing is, despite Paulson’s, um, heroism (and Newmark’s sycophancy), we’re still vulnerable if we don’t fix the things that got us here in the first place:

We have both spent large chunks of our lives working on Wall Street, absorbing its ethic and mores. We’re concerned that nothing has really been fixed. We’re doubly concerned that people appear to feel the worst of the storm is over — and in this, they are aided and abetted by a hugely popular and charismatic president and by the fact that the Dow has increased by 35 percent or so since Mr. Obama started to lay out his economic plans in March. But wishing for improvement and managing by the Dow’s swings are a fool’s game. …

The storm is not over, not by a long shot. Huge structural flaws remain in the architecture of our financial system, and many of the fixes that the Obama administration has proposed will do little to address them and may make them worse. …

Six months ago, nobody believed that our banking system was well designed, functioning smoothly or properly regulated — so why then are we so desperately anxious to restore that model as the status quo? Nearly every new program emanating these days from the Treasury Department — the Term Asset-Backed Securities Loan Facility, the Public Private Investment Program, the “stress tests” of major banks — appears to have been designed to either paper over or to prop up a system that has clearly failed.

Instead of hauling out the new drywall to cover up the existing studs, let’s seriously consider ripping down the entire structure, dynamiting the foundation and building a new system that rewards taking prudent risks, allocates capital where it is needed, allows all investors to get accurate and timely financial information and increases value to shareholders and creditors.

Problem is, the Tim Geithners of the world are what got us here in the first place. And Barack Obama is what got Geithner here in the first place.

Thursday, May 28, 2009 6:49 pm

Another member of the Cassandra Club

Filed under: I want my money back. — Lex @ 6:49 pm
Tags: ,

Brooksley Born apparently is too polite to say “I told you so.” But, frankly, Ms. Born, we find ourselves in a situation in which rudeness is called for (not, unfortunately, that it will do much good at this point):

A little more than a decade ago, Born foresaw a financial cataclysm, accurately predicting that exotic investments known as over-the-counter derivatives could play a crucial role in a crisis much like the one now convulsing America. Her efforts to stop that from happening ran afoul of some of the most influential men in Washington, men with names like Greenspan and Levitt and Rubin and Summers — the same Larry Summers who is now a key economic adviser to President Obama.

She was the head of a tiny government agency who wanted to regulate the derivatives. They* were the men who stopped her.

The same class of derivatives that preoccupied Born — including the now-infamous “credit-default swaps” — have been blamed for accelerating last fall’s financial implosion. But from 1996 to 1999, when Born was the chairman of the Commodity Futures Trading Commission, the U.S. economy was roaring and she was getting nowhere with predictions of doom.

So, upstairs in the big house in Kalorama, Born tossed and turned. She woke repeatedly “in a cold sweat,” agonizing that a financial calamity was coming, she recalled one recent afternoon.

Of all the depressing, enraging items in this profile, this might be my favorite:

Born’s baptism as a new agency head in 1996 came in the form of an invitation. Federal Reserve Chairman Alan Greenspan — routinely hailed as a “genius,” the “maestro,” the “Oracle” — wanted her to come over for lunch.

Greenspan had an unusual take on market fraud, Born recounted: “He explained there wasn’t a need for a law against fraud because if a floor broker was committing fraud, the customer would figure it out and stop doing business with him.”

Well, thank goodness that’s true, otherwise those Hunt brothers and Mike Milken and Bernie Madoff and all those other guys could have made off with a lot of people’s money. I guess in some dimension, somewhere in some parallel universe, “genius,” “maestro” and “the Oracle” mean “dumber than a box of floor tiles.”

Wednesday, May 27, 2009 5:26 pm

“It’s finished”

Filed under: I want my money back. — Lex @ 5:26 pm

When John Lanchester says that, the “it” he’s talking about is Britain, but he suggests the U.S. is in similar straits. This humorous yet very depressing piece on how the UK’s financial markets went to hell has a great deal in common with what happened on this side of the pond. There are a lot of good lines in it, but I think this was my favorite:

All of this makes [the Royal Bank of Scotland’s] corporate report for 2007, published just weeks before the bank had to go back to the markets for more capital, a document of unusual interest. Northrop Frye somewhere defines ‘irony’ as involving a state of affairs in which words have a different meaning from their apparent sense. This can be achieved by the audience’s knowing something the speaker doesn’t: so the speaker is saying one thing but we are understanding another. The RBS corporate report is like that. (So are their slogans: ‘Make it happen.’ Make what happen? A £100 billion tab for the taxpayer?)The section on corporate citizenship at the beginning is particularly good value. The firm is involved in plans to increase general levels of financial education. ‘When people have been educated about money and how to work with financial services firms they are more likely to make the right decisions and to avoid difficulties.’ That’s true, but you can also just rob post offices. ‘RBS is a responsible company. We carry out rigorous research so that we can be confident we know the issues that are most important to our stakeholders and we take practical steps to respond to what they tell us. Then occasionally, we blow all that [expletive] off, fire up some crystal meth, and throw money around with such crazed abandon that it helps destroy the public finances of the world’s fifth biggest economy.’ See if you can guess which of those sentences is not in the report.

Tuesday, May 19, 2009 8:01 pm

In other financial news, the sun rises in the East

Filed under: I want my money back. — Lex @ 8:01 pm

Looks like banks that took bailout money may have found yet another way to screw taxpayers.

What part of “fiduciary responsibility” do politicians and bureaucrats not understand?

Tuesday, April 14, 2009 10:31 pm

Yes, we have no bananas

Filed under: I want my money back. — Lex @ 10:31 pm

Slavering approval of our economic program — by Zimbabwe. Bonds as a guaranteed non-risk asset class. Stress tests that are neither stressful nor tests. From The Barricade Blog, it’s the Top 10 Signs that You Are Living in a Banana Republic!

Friday, April 10, 2009 4:49 pm

Simple answers to simple questions (special zombie edition)

Q: What kind of bank can pass the feds’ “stress test” yet still need more taxpayer money?

A: Zombie banks that should be nationalized.

Q: What kind of stress test is a test that all 19 of the nation’s biggest banks can pass even though some of them obviously are in a world of hurt?

A: A zombie test.

This has been another edition of Simple Answers to Simple Questions.

Monday, March 23, 2009 10:23 pm

Quote of the day, Treasury Secretary Tim Geithner edition

Tbogg, on Geithner’s newly released (but not new; see earlier Geithner plan, Paulson plan) plan to stick taxpayers with the cost of banks’ bad assets while letting private interests get the vast majority of any profits:

“Geithner isn’t Michael Brown. He’s Hurricane Katrina.”

Bankrupt firms belong in bankruptcy court, not sucking endlessly on the public teat. It’s Geithner’s responsibility to get them there, and not only is he not doing it, he’s doing his dead-level best to keep them on life support. (Other things he’s doing wrong here.)

Now, that said, I should point out that Geithner isn’t operating in a vacuum: He’s doing what Barack Obama wants him to do. So either Obama doesn’t understand the ramifications of the plan, or he understands perfectly well and just doesn’t care.

I vote the latter. Obama could well end up a one-term president because of it. And that’s what he would deserve.

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