Comments on: All About Optics (Predicting Stress Test Outcomes)

By: Mel Blunt

Mel Blunt — Thu, 07 May 2009 23:30:57 +0000

Can you please elaborate on exactly what you mean by “If Jamie Dimon and JP Morgan can do it?”

By: q

Thu, 07 May 2009 22:08:55 +0000

Friedman is gone. He “resigned”.

By: self-evident » Aw, poor guy

self-evident » Aw, poor guy — Thu, 07 May 2009 21:59:25 +0000

[...] Remember how the Chairman of the NY Fed owned stock in Goldman Sachs, bought more, and did not disclose it as required? And the official response was that he had done nothing wrong? [...]

By: gantrants

gantrants — Thu, 07 May 2009 18:48:03 +0000

I saw this coverage of the stress test: http://www.newsy.com/videos/stressing_over_stress_test/ and it brought up some interesting points, but when I saw that banks including Wells Fargo, Citi, and especially BofA needed more equity is made me skeptical of the whole thing. I think that giving our any more money is just a crime and it’s time for the banks to be held accountable. If Jamie Dimon and JP Morgan can do it, what happened at Bank of America? I mean $34 billion is inexcusable.

By: The Gold Standard » Game over. Banks have won.

The Gold Standard » Game over. Banks have won. — Thu, 07 May 2009 16:54:32 +0000

[...] Simon Johnson’s piece on stress-test optics would complete your reading list for the day on the political economy of the [...]

By: Meanwhile, in the Rest of the World - Economix Blog - NYTimes.com

Meanwhile, in the Rest of the World - Economix Blog - NYTimes.com — Thu, 07 May 2009 09:48:31 +0000

[...] become so caught up in our banking stresses and stress tests in the United States that we sometimes forget about what is happening in other [...]

By: Pitchfork

Pitchfork — Thu, 07 May 2009 06:27:45 +0000

Obama is surrounded. Check out the relationships between Rubin, Geithner, Summers but also Emmanuel and Axelrod. Obama owes a lot to Axelrod, arguably his office itself, and one must assume he will not move against this entire group.

What a mess! One party is led by wierdos and dunces and the other is the servant of a grossly inflated and rotten-to-the-core financial sector. Protected from both market discipline and a big guy with a pitchfork, the financial insiders will continue to collect enormous rents, destablize asset prices, and drive the entire economy down to a double-digit unemployment-or-inflation equilibrium.

It is a little frightening that the likes of Citigroup will not merely survive this crash but once again will support lavish consumption with other people’s money. But it is a lot more frightening that most American firms and households will do exactly that same thing. The worldwide extent of the crash, and especially the mass defaults in southern and eastern Europe, are now sustaining our collective illusion that the current upticks in the “indicators,” so dear to mediocre economists, are signs of a recovery. But for a solid and lasting recovery, we must pay down our external debt. Sad to say, neither the financial engineers in Citigroup, who know only how to shuffle around credit, nor the financial engineers in the Obama administration, who know only how the shuffle around debt, have demonstrated that they know much of anything about how to pay down the external debt. Indeed, their wearisome pieties about “comparative advantage in finance” and “free trade” are strong evidence that, in the matter of producing as much as one consumes, the financial engineers are clueless.

By: Mel Blunt

Mel Blunt — Wed, 06 May 2009 15:56:37 +0000

I can appreciate where you are coming from, but can you tell me if there is any currency that qualifies as an honest currency today?

By: Alfred

Alfred — Wed, 06 May 2009 14:57:43 +0000

From this post and from experience of the past two years it is clear that we have a classic conflict of interest here. This goes indeed past a single appointed/elected official taking advantage of insider status. While i do think that TARP, TALF and others where necessary i am far less convinced of TBTF. Washington was very eager to safe Wallstreet entirely, with the exception of Lehman, and used an all or nothing argument. Either we safe financial instutions or we all will experinece catastrophe. That was clearly the selling point. This blindfolded generalizaten as opposed to a more market leaning approach reveals the deep-rooted connection between Wallstreet and Washingon. After all where would Washington be- where would this country be without Wallstreet.

By: Hal

Hal — Wed, 06 May 2009 13:59:20 +0000

The news that BofA now needs over 30 billion in capital infusion is telling to me. And I’ve been looking at the precious metal prices with the widget http://www.learcapital.com/exactprice and continue to be surprised that gold and silver remain strong considering what the DOW had done since March. Tells me that a lot of investors are still worried and this morning I see that the stress test news is sending all the precious metals up at market open. One of the indicators I think of some of the fear in the back of people’s minds.

Throw into the mix China and their buying of gold and attempts to lessen their US debt buying and holdings and I’m not so sure the future of the US economy is as bright as our gov is painting it.

By: c smith

c smith — Wed, 06 May 2009 12:35:57 +0000

The investment banks (Goldman, MS) have higher tangible common equity then a lot of the others but don’t have huge, low cost deposit bases. TCE heavily favored them. The traditional banks with huge deposit bases got them by acquisition at over book value — creating goodwill — which is excluded from TCE.

Smartest comment I’ve seen yet on this whole mess. Buffett said it as well: THE VALUE IS IN THE LOW COST DEPOSIT BASES, but the biggest consolidators are being hurt by the focus on TCE. Why else would Goldman, Morgan et al have scrambled to become banks??? These guys are sellling non-guaranteed debt at 350 over treasuries…very expensive funding.

By: Evening Reading: The Treasury, the Stress Test and Credibility | Blogoboro.com Blogs

Wed, 06 May 2009 12:31:56 +0000

[...] One of the main concerns is that banks are negotiating with the Treasury over the results of the test. That, in the eyes of some, seems to indicate the banks are running the show. The Treasury now is struggling to disabuse some well known investors, economists and financial bloggers of that view, writes Simon Johnson. [...]

By: Mike, NY

Mike, NY — Wed, 06 May 2009 12:29:02 +0000

Oustanding piece of analysis and writing. You and Willem Buiter for Fed Chair / Treasury Secretary.

(Can blame a guy for wishing…)

By: Hoi Polloi

Hoi Polloi — Wed, 06 May 2009 09:57:43 +0000

Well, if one has lavished from the easy flowing fountain of money the last decades, than it’s clear that the banksters are not willing at all to give up this chicken with the golden eggs. It’s utterly naive to think that the banksters are capable of self-regulation or self-reflection. Only extremely tight regulation and control of the, partly, state owned banks can provide a correct flow of financials in all layers of the community.

One would think that only Obama could do this. But I’m very disappointed by the reluctancy and reserved approach by the Obama government. Obama is for a better world, but why doesn’t he attack the banksters now he has the power??

Big Finance should be broken down to smaller, better controlable and manageable units.

By: simpleman

simpleman — Wed, 06 May 2009 07:55:19 +0000

It seems to me that the only way we are ever going to have an honest banking system will only begin when we have honest money. The value of the dollar has dropped over 90% since the inception of “The Fed”(A real misnomer since there is nothing federal about it)and the 100% devaluation seems very near. We can’t continue to print money out of thin air and expect to have a fair economy. Jefferson warned of a central bank. Jackson fought it and broke it up. Lincoln turned his back on the banks and issued greenbacks. The constitution gives the power to issue money based only gold and silver. It says nothing that grants congress the power to give that away. We must have honest money to have an honest, transparent economy.

http://www.richardccook.com/2009/03/27/six-part-video-now-available-credit-as-a-public-utility-the-solution-to-the-economic-crisis/