Monday, March 16, 2009

Wells Fargo Calls Stress Test ‘Asinine’

Another punch at Geithner.

Wells Fargo & Co. Chairman Richard Kovacevich criticized the U.S. for retroactively adding curbs to the Troubled Asset Relief Program, which he said forced the bank to cut its dividend, and called the administration’s plan for stress-testing banks “asinine," Bloomberg is reporting.

“Is this America -- when you do what your government asks you to do and then retroactively you also have additional conditions?” Kovacevich said at a speech at Stanford on the 13th. “If we were not forced to take the TARP money, we would have been able to raise private capital at that time” and not needed to cut the dividend to preserve cash, he said.

Kovacevich has a point. When the government forced all the big banks to take "bailout" money, it confused the market as to who was going to survive and who wasn't. The market would have taken care of things back then, by forcing into bankruptcy those who couldn't withstand the crisis period. Instead, we continue to have a period of confusion---though that is slowly ending as it becomes clear that the Fed will print money to prop up anyone of the majors who isn't direct enemy of Goldman Sachs.

As for the stress test, from the start it has been about politics.

“We do stress tests all the time on all of our portfolios,” Kovacevich said. “We share those stress tests with our regulators. It is absolutely asinine that somebody would announce we’re going to do stress tests for banks and we’ll give you the answer in 12 weeks.”


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