Am I missing something here, or are these paragraphs at odds with each other:
For the last eight weeks, nearly 200 federal examiners have labored inside some of the nation’s biggest banks to determine how those institutions would hold up if the recession deepened.
What they are discovering may come as a relief to both the financial industry and the public: the banking industry, broadly speaking, seems to be in better shape than many people think, officials involved in the examinations say.
That is the good news. The bad news is that many of the largest American lenders, despite all those bailouts, probably need to be bailed out again, either by private investors or, more likely, the federal government. After receiving many millions, and in some cases, many billions of taxpayer dollars, banks still need more capital, these officials say.
Exactly how bad did they think things were that they in better shape than they thought they would be, but STILL need hundreds of billions of dollars? And why aren’t the results being made public so people outside of government can discuss them?
*** Update ***
The more I read about this, the more the stress tests sound like a t-ball game rather than an inspection of the bank’s viability. Everyone gets credit for playing the game, we’re all winners, but we never kept score.
bago
I believe that "Nobody could have predicted…" is the phrase in operation.
schrodinger's cat
They are not telling us everything. This sounds very fishy indeed.
Evinfuilt
Remember they just changed an Accounting rule so they don’t have to report the losses on their junk assets right now.
So yes, things are looking up!!! And they’ll need a bailout when reality returns.
edmund dantes
Remember illusions are more effective and impressive when you can’t see how they are done.
max hats
Thank god! I was afraid I might not get to transfer more of my wealth to the financial sector.
The real hedge fund is us.
Zifnab
@schrodinger’s cat: They are, in fact, telling us everything. They’re just hoping we don’t notice.
Zoogz
Is anyone else getting a mental image of a bank vault with two broken saltine crackers on the floor and a moth fluttering nearby?
The Moar You Know
Your kids have been taken with you and placed with a foster parent.
It’s not Phil Spector, as you were originally told. It’s Michael Jackson.
You kids are doing "better than expected", right?
The Moar You Know
@Zoogz: There are no crackers and the moth is dead.
Just Some Fuckhead
Prolly just floating the idea of another bailout to see how it goes over. Banks can stay in business as long as too many people don’t want their money at the same time. But 1) the government wants to reinflate another bubble to spur the economy and this requires copius lending that banks are reluctant to do now and 2) banksters are greedy fuckers that like free money from the government that can’t be tracked or accounted for. (see: TARP)
Jay in Oregon
To prevent runs on the banks in question, most likely.
It’s the same reason the FDIC walks in at 5:01 pm on a Friday to close a bank down. This American Life had a reporter follow an FDIC-led bank closure; they are very hush-hush about their operations, to the point of using fake names when checking into hotels, staggering arrival times in rental cars to avoid notice, and swooping in on a bank with military precision.
And yes, "better than expected" is probably the new "safer, but not yet safe.".
Zandar
Because then you would have people publicly discussing the fact the the banks need trillions of dollars still to stay solvent, and then wondering where the hell that money is actually coming from.
After that you devolve to the shotguns and canned goods part pretty rapidly.
justme
Because it’s bullshit.
This installment of "stupid answers to simple questions" brought to you by…
Wait,
Fuck the crackers. What bugs me at this point is everybody in DC doing their level best to hose off the trail of muddy footprints leading out of said vault and merrily skipping down the street to…?
Brick Oven Bill
The reason that the results are not being disclosed is because the administration is transparent. We have previously been informed of this.
And he did now bow. And all smokers make more than $250k/yr. And there will be no lobbyists. And combat troops would be drawn down 1-2 brigades per month starting in January. And legislation would be posted online 5 days before it is voted on.
This is unless, of course, after it is voted on, it will sit on a desk for four days before being signed into law. This is because he was born in Hawaii, but is really busy.
anonevent
I think what it means is that the banks would be solid if they could get rid of the "toxic assets." There’s not a lot to restructure, and the only thing we gain by taking a bank over is that the mess has the government’s name on it rather than the banks. So, if we’re not willing to let the bank collapse under the weight of the assets, then the only thing that really has to be done is throw money at it.
Whether that’s what we want to do is a different question.
The Moar You Know
@Brick Oven Bill: You are not even trying anymore, and it hurts my feelings. Aren’t I worth the effort? I’m still special, right?
bago
@Brick Oven Bill: What?
I have done enough Ketamine and LSD to play fast and loose with the boundaries of reality, but… WHAT?
Smokers are getting tax hikes because someone was born in Hawaii? What?
Dude, you are hurting my brain way more than any chemical short of formaldehyde could.
P.S. What?
Zoogz
BoB may have just read the report sideways. Turn the monitor, Bill.
DanSmoot'sGhost
Oh gee, I don’t know, er, um, could they possibly be talking about two different things? Two different problem sets?
(That immediate liquidity, ability to withstand the effects of a recession, credit availability …. might be tied to different sets of criteria and imperatives? Just sayin.)
Sure, call me crazy for suggesting this (you know, since it seems pretty obvious from the context, and I’ll give you that the piece is not well written). But you’re a guy whose main approach to this whole story (bank bailouts in general) since last fall has been "I don’t know anything about this stuff, but …."
So pardon me if I don’t bark like the trolled hyenas on cue here. Sorry. Really, I am. I like to bark as much as the next hyena. It clears out the throat and gets the lungs going.
Well, I saw Lon Chaney walkin with the queen, doing the werewolves of London.
I saw Lon Chaney Jr. walkin with the queen, doin the werewolves of London
I saw a werewolf drinkin a pina colada at Trader Vic’s
And his hair was perfect.
gypsy howell
Really makes me want to write that check to our government next week.
Meanwhile:
After they took $25 billion (or was it more?) in our tax dollars. Which they said they didn’t want.
I’m just too astounded and disgusted to even react anymore.
blogenfreude
Someone on NPR said this morning that the stress tests were like Lake Wobegon – every child is above average.
srv
Cartoon from 1934.
Good thing we have helicopters now.
h/t reddit
Bill H
Anybody see Paul Krugman on The Maddow Show last night. His gist was that if the "stress testors" came out with some sort of generalized statement that things were basically okay that it would mean we should all run for the bomb shelters. I am looking for the nearest bomb shelter.
His blog is overloaded at the moment – I think everybody wants to know what he thinks.
srv
FYI, banks more sophisticated than others are going to retroactively apply Mark-to-Market for Q1. So they’ll have fabulous reports.
I’ll give you the same advice I gave some republican golf partners during the CA natural gas shakedown: "Buy all the Enron you can".
BOB, Atta, buy all the financials you can. They can only go up.
DanSmoot'sGhost
@gypsy howell:
Well, once you pull yourself together, you could google this in about ten seconds:
But, you know, why confuse ourselves with facts?
Brachiator
@Brick Oven Bill:
You’re more fun when you are making up stories about the Obama Administration and gun sales to Mexican drug lords.
There’s a lot of quotes of people in the background in this story, but (for some good reasons) not much reporting on the actual stress tests. But this piece of the story is very telling:
Again, the financial markets are trying to have it both ways. After years of playing with no rules and phony securities ratings, they are now balking at the government’s evaluation of their books, and are also trying to flex some muscle, resisting some of the government’s proposals about how they should take on some of the banks’ toxic assets.
In short, they want the best side of the deal, and are threatening not to free up as much capital as Treasury would like if they don’t get their way.
And it may be a coincidence, but the story about investor resistance is coming out at the same time as the interview in which George Soros is claiming that Obama and Treasury did not go far enough in dealing with the financial industry.
I wonder if a threat of nationalization might finally be put on the table to scare the bejeebus out of reluctant bankers and investors.
Good cop/bad cop, Obama style.
anticontrarian
are there trophies?
cyntax
@srv:
Meh. There are some constructive criticisms to be made about the bailout and the stimulus (though not the same ones), but that cartoon so obviously didn’t come true that I’m not sure trotting out that chesnut is worth much.
NonyNony
@Jay in Oregon:
This.
I imagine that if even one of these banks needs to be nationalized, in public it’s going to get a clean bill of health from the Treasury. Nothing will happen until 6pm on a Friday and then the takeover will be announced.
And if multiple banks need it, they’ll all be announced at the same time in toto. With assurances that "these are all the banks with problems this severe" and whatnot. Because the previous Treasury screwed up with Bear Stearns and almost caused a total collapse, and the current Treasury is too spooked to do anything.
(That Times story is completely nonsensical, BTW – it basically amounts to "here’s a bunch of contradictory rumors I’ve heard that I’m going to pass along unsourced. Enjoy!" Even reading between the lines is mostly meaningless – I’d say I’m not sure why the Times published such a piece of nonsense, but then I’d have to admit that I’m not sure why the Times publishes about half the things it does.)
gypsy howell
@DanSmoot’sGhost:
I don’t think I’ll hold my breath.
valdivia
I found the NYT piece very vague and not sourced at all and also: completely contradictory all banks have been said to pass the tests but banks will have to fail. Huh? If anything I want a really well sourced (quotes from actual people) piece that confirms what s going on or not because based on the NYT–I really cannot judge (and all the commentary I have seen on it does not do any new reporting, which is what is missing)
Ricky Bobby
I think I could put together a "stress test" for our banks that would achieve similar results via gmail chat.
Me (Gub’ment): u guyz ok?
Bank: yeah
Me: kk
Bank: we needs moar moneyz plz
Me: kk
DONE! Onto the next bank. I should have this shit nailed down by the end of the week.
guest omen
from nyt:
For the last eight weeks, nearly 200 federal examiners have labored inside some of the nation’s biggest banks to determine how those institutions would hold up if the recession deepened.
nakedcapitalism is suggesting 200 examiners isn’t sufficient:
When Citi nearly went under in the early 1990s, it took 160 examiners to go over its US commercial real estate portfolio
if we don’t even have sufficient enough manpower deployed to do a proper stress test, how do people expect an ability to nationalize the banks?
ThatLeftTurnInABQ
I’ve been asking the same question in various corners of pitchfork-and-torch-land and never seem to get anything other than blank stares back in response. I guess you take over a large chunk of the global financial system with the FDIC and Treasury staff you have, not the staff you wished you had.
Also, the financial weapons of mass looting are located somewhere north, south, east or west of lower Manhattan. Or in London. Maybe.
Xanthippas
Honestly, I’d be surprised if that’s NOT what’s going on.
Comrade Dread
We live in a new age of government transparency?
No, I’m imagining more like the end of Trading Places, except the Dukes won and they’re laughing and opening another bottle of champagne at the news that the government is going to send them another check for a hundred million.
Considering that I read that on a typical mid-sized bank, they usually have over a hundred investigators, yeah, it seems a bit less stringent when you’ve got 200 investigators covering 19 behemoths.
I think the test probably consisted of the same dutiful reporting our media provides.
Investigator: So, Bob, how’s the bank doing?
Bob: Fine and dandy.
Investigator: Great. Can I see your books?
Bob: No. Will a spreadsheet and PowerPoint I had our PR guys draw up for CNBC suffice?
Investigator: Sure. If you can’t trust a bank CEO, who can you trust?
Patrick
The two paragraphs make sense if most of the largest banks are solvent. However, that still leaves room for Citi and maybe BOA. The "source" wouldn’t want to say, ‘all but one’, because everyone would know which one. Buying was much more subdued today in C than the other banks.
Citi is probably okay also, if the economy picks right up from here. But, nobody expects that, so the quote, "probably…need more bailout".
Krugman is working under the thesis that the business cycle is no more. That is pretty radical, since the business cycle has been around for eons.
Jonathan
This is the ‘pump and dump’ phase. Expect massive insider selling immediately followed by Dow 4000.
Read the FOMC minutes to see how bad the wider economy is, and hence the banks balance sheets.
Eric Etheridge
Here’s a roundup of not-very-respectful opinion on the assertions reported in the NYT article.
Tax Analyst
(Sigh)…if they’d only had this rule when I went to Med school I’d be a surgeon today. Anybody want their gall bladder out? Don’t worry, if I screw it up somebody else will come by and fix you up.
But if an ordinary person who has lost their job goes to try and get Food Stamps they’d better not own a car worth more than a few bucks, ’cause that means they ain’t poor enough yet to qualify. "Come back when you’re a little more destitute, OK?"
Elie
Well its clear that including Krugman, we should all expect a detailed report on the status of every bank. And we should know that independent of whether it affects anything abou next steps – Transparency is the only virtue.
Naw — we need to know and that is the only value. Liars and thieves — thats all they are! Knew it all along…