Stress

Tim Geithner explains how he did it. Lambert at Corrente thinks he did it wrong.

I will note only in passing that Timmy conflates "detailed loan data" with loan records. Only an examination of the records would show the scale of the accounting control fraud, since the computer data already has the fraud "priced in", as we might say.

Geithner's article is a real piece of work. He tries to convince his readers that banks will be able to "de-stress' themselves without taxpayer help, by selling off non-core businesses and converting "other forms of capital" into common equity. But...

Banks will also have the opportunity to request additional capital from the government through Treasury’s Capital Assistance Program....

Isn't that a sweet way to phrase it? This is all about opportunity. You're not against opportunity, are you?

I see nothing here about what, not so very long ago, was called moral hazard. Nothing about those obscene bonuses. Nothing about making the bastards who got us into this mess feel pain.

There's another potential problem. Geithner:

Some banks will be able to begin returning capital to the government, provided they demonstrate that they can finance themselves without F.D.I.C. guarantees. In fact, we expect banks to repay more than the $25 billion initially estimated. This will free up resources to help support community banks, encourage small-business lending and help repair and restart the securities markets.

Trouble is, Congressman Brad Sherman (who has opposed the Geithner bailout) thinks that this practice may be illegal

Sherman points to language in the Emergency Economic Stability Act -- the bailout bill that created the Troubled Asset Relief Program -- that specifically states that revenues and proceeds from sales of troubled assets "shall be paid into the general fund of the Treasury for reduction of the public debt."

In other words, the taxpayer is supposed to get his money back.

It occurs to me that half of this $25 billion could solve GM's problems. Must the cash head back into the banks...?

Let's close with a few words from Naomi Klein:

If you mean the bank bailout, I think it’s a disaster, crony capitalism at the absolute worst.

Larry Summers and Tim Geithner came up with a plan to bail out the banks that is actually a disguised bailout for the hedge funds — where the government is not bailing out the hedge funds directly because they can’t sell that, but hedging the hedge funds to buy the toxic assets of the banks — instead of nationalizing the banks and breaking them up, which is what needs to happen. This is very different from what FDR had the guts to do. He used that progressive movement, he used the rage at the banks, to pass Glass-Steagall. And there’s no excuse for the fact that there’s been no serious re-regulation of the financial sector. The idea that you would somehow hand out trillions of dollars to the banks and then regulate them months later is crazy. You have the leverage when you’re handing out the money. “You say you want a bailout? Well here are the new rules.”

Yeah, I noticed the same thing a while back. The Obots are very quick to blame eeeeee-vil Bill Clinton for the end of Glass-Steagall, even though it was not his fault. But when you mention that Obi and the congressional minions have done nothing nothing nothing to re-impose the regulations that would have prevented this crisis, what do the bots say?

Nothing. Not a thing.