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"Jamming Your Own Signal"

By Ethan Brown, Section Economy
Posted on Wed May 06, 2009 at 08:53:00 PM EST
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Apologies for the long silence but I've been taking in all the confusing and confusing, bad-news-is-good-news framing of the leaks regarding the results of the stress tests.

Bank of America, Wells Fargo and GMAC LLC all need need more capital.

MetLife, however, does not need more capital.[More...]

Turns out I'm not the only who is confused about what we're supposed to conclude about the health of the banking system from the stress tests. Over at Baseline Scenario, Simon Johnson writes that regulators are "jamming" their signal on the stress tests in order to achieve the precarious balance of not seeming "too easy on the banks" which "looks bad" while at the same time not being "tough on the banks" which "might be dangerous."

"Is everyone confused yet?" Johnson asks. The answer is undoubtedly "yes" and that is certainly the intention of the regulators.

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    "Jamming Your Own Signal" | 17 comments (17 topical)

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    "Tough on banks".... (5.00 / 1) (#4)
    by kdog on Thu May 07, 2009 at 09:29:11 AM EST
    thats a laugher...since when is holding the banks responsible for the actions of the banks considered "tough"...I call that fair.

    BofA, Wells, GMAC....they "need" more capital eh?  Here's a novel idea...get a real job like everybody else who needs more capital....don't you dare look for another go at the taxpayer teet.  "The world needs ditchdiggers too, Danny."

    Stupid, lazy... (none / 0) (#9)
    by MileHi Hawkeye on Thu May 07, 2009 at 10:34:20 AM EST
    ...capitalists!  Get a job, you hippies!!

    Where's my capital, that's what I want to know...

    Parent

    I guess only... (none / 0) (#10)
    by kdog on Thu May 07, 2009 at 10:39:06 AM EST
    those wearing workboots have to pull themselves up by the straps...penny loafers and wing tips are exempt from free market rules and principles.

    Ah...has it ever been any other way?  The song remains the same.  

    Parent

    It does seem... (none / 0) (#11)
    by MileHi Hawkeye on Thu May 07, 2009 at 10:51:08 AM EST
    ...that those who cry the loudest about welfare cheats and such things are first in line with their hands out when there's government money to be had.

    Privatize the profits, socialize the losses.

    Parent

    Just like the fuedal system... (5.00 / 1) (#15)
    by kdog on Thu May 07, 2009 at 12:05:09 PM EST
    when the peasants made the lords good dough with plentiful crops, all was well...when those crops didn't come in guess who went hungry.

    Times are changing back...ah well, the working stiff had a nice run in this country for 50 years or so...all things must pass.  

    Parent

    SEC out for a "pound of flesh"? (5.00 / 1) (#14)
    by MileHi Hawkeye on Thu May 07, 2009 at 11:40:37 AM EST
    CRITICS OF THE OBAMA ADMINISTRATION have claimed it has been too easy on Wall Street by providing billions in bailouts following the financial meltdown. Now, however, the Securities and Exchange Commission is seeking its pound of flesh in the form of civil suits against participants in two sectors caught up in last year's near-meltdown, credit-default swaps and money-market funds.

    In one action, the SEC sued alleging insider trading in largely unregulated credit derivatives against a hedge-fund trader and a salesman for Deutsche Bank. In a separate civil suit, the SEC alleged fraud by the founder of the Reserve Primary Fund, the money fund that "broke the buck" -- that is, saw its net-asset value fall below $1.00 a share -- in the wake of the Lehman Brothers bankruptcy last September.

    Link

    Give just enough good news to give (5.00 / 1) (#16)
    by ruffian on Thu May 07, 2009 at 01:00:35 PM EST
    investors a reason to think some banks will survive, and so invest.  I get the feeling that they are just trying to string the whole bank failure scenario out as long as possible in hopes for a recovery in the overall economy. But the other shoe has yet to drop in the foreclosures, so I am not confident they have a realistic view of how many toxic assets are owned by these banks. And the economy is not going to recover for a long time, seeing as it was largely fueled by credit tied to housing assets.

    Time will tell - I have no confidence that the bansks are telling anything.

    I'll add that if it works (none / 0) (#19)
    by ruffian on Thu May 07, 2009 at 02:50:13 PM EST
    in five years I'll applaud it as a having been a great strategy. I hope I will have the good grace to admit I did not think so at the time.  But I have my doubts at the momnet.

    Parent
    "Deploying tinsel" (none / 0) (#1)
    by lambert on Wed May 06, 2009 at 09:28:47 PM EST
    Makes sense. What Versailles is really, really good at is obfuscation.

    the very recent headlines... (none / 0) (#2)
    by Ethan Brown on Wed May 06, 2009 at 09:38:59 PM EST
    on the stress tests are interesting. lots of optimism:

    "As Stress Tests Are Revealed, Markets Sense a Turning Point"

    www.nytimes.com/2009/05/07/business/07bank.html?hp

    Clearly the intention was to get the bad news out of the way first...a sound PR strategy but I'm not sure that we're much closer to getting a sense of the banks' health.

    It's crystal clear (5.00 / 3) (#3)
    by NYShooter on Thu May 07, 2009 at 01:25:15 AM EST
    They will force health onto the banks;
    Even if they have to wipe out every customer first.

    Greenspan warned investors about "irrational exuberance!;"
    Geithner says, "irrational exuberance is good; we'll even give you the money to buy it."

    "The job market is hemorrhaging blood!"
    "But it will hemorrhage blood at a slightly slower rate for the next year...two, o.k, maybe three."

    "Industrial production is almost non-existent";
    "But, "It's better than expected."

    The NYTimes says, "While jobs are being lost, some jobs are being created."
    This is good because the $50/hr. jobs being lost are making room for the $8/hr jobs.

    Go market, go!
    Buy, baby, buy!


    Parent

    Some of those newly created (5.00 / 1) (#13)
    by easilydistracted on Thu May 07, 2009 at 11:10:58 AM EST
    jobs are probably collection agencies, auto repossession companies and payday loan companies. And maybe a couple on new positions at your local WalMart because its business appears to be booming. Humph.  

    Parent
    No matter how much blood you pump into a zombie... (none / 0) (#6)
    by lambert on Thu May 07, 2009 at 10:11:02 AM EST
    ... it's still a zombie.

    TGeithner's Op-ed in... (none / 0) (#7)
    by santarita on Thu May 07, 2009 at 10:26:36 AM EST
    NYTimes today should be read.

    LOLfed has a nice response (none / 0) (#18)
    by lambert on Thu May 07, 2009 at 02:14:14 PM EST
    here.

    And Ritholtz has the key text.

    Parent

    David Coppefield (none / 0) (#8)
    by SOS on Thu May 07, 2009 at 10:28:50 AM EST
    working for the Feds on this bank business?

    I would say (none / 0) (#12)
    by TeresaInSnow2 on Thu May 07, 2009 at 11:10:13 AM EST
    more like Emeril Lagasse (as in a COOK, if you know what I mean).

    BAM!  Passed the stress test.

    Parent

    "Jamming Your Own Signal" | 17 comments (17 topical)

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