Sunday, March 1, 2009

The Political Stress Test

If they want you to survive, you will. If they want to take you down, that can be done. NYT on this oh so sophisticated stress test:

In a telephone conference call with reporters, officials from the Fed and Office of the Comptroller of the Currency said there would be no simple measure for “passing” or “failing” a test, and provided only vague descriptions of how they would interpret the results....“The stress test is about politics,”[Christopher Whalen, managing director at Institutional Risk Analytics]. “The O.C.C. and the Fed already know the answer. The answer is that we’re going to have to come to a decision: are we going to put in more equity or are we going to resolve the banks through bankruptcy?”

1 comment:

  1. Interesting op-ed in today's (Mar 2 09) FT by James Baker III urging we kill off the zombie banks.

    "Next, we should divide the banks into three groups: the healthy, the hopeless and the needy. Leave the healthy alone and quickly close the hopeless. The needy should be reorganised and recapitalised, preferably through private investment or debt-to-equity swaps but, if necessary, through public funds. It is time for triage."

    So the government selectively targets and liquidates the "needy" and Carlyle scoops them up.

    "...we would be wise to avoid another Japanese mistake - raising taxes."

    Oh, and please don't tax our profits.

    Consider it all done.