US Treasury secretary Timothy Geithner says that we don't need to bail out the banks anymore based on the results of his stress tests. We should follow up quickly on his assessment and start shutting the special Fed lending facilities enjoyed by the banks, the FDIC loan guarantee programme and the AIG slush fund.
As spring comes to America, optimists are seeing "green sprouts" of
recovery from the financial crisis and recession. The world is far
different from what it was last spring, when the Bush administration
was once again claiming to see "light at the end of the tunnel". The
metaphors and the administrations have changed, but not, it seems, the optimism.
Hooray! The banking crisis is over! Let's party! O.K., maybe not.
In the end, the actual release of the much-hyped bank stress tests on Thursday came as an anticlimax. Everyone knew more or less what the results would say: some big players need to raise more capital, but over all, the kids, I mean the banks, are all right. Even before the results were announced, Tim Geithner, the Treasury secretary, told us they would be "reassuring."
But whether you actually should feel reassured depends on who you are: a banker, or someone trying to make a living in another profession.
Now it's official. Prosperity is right around the corner. We have heard
the good news from both Wall Street and Washington. President Obama is
careful not to use those very words, since this is what Herbert Hoover
kept telling Americans during the country's ugly, post-1929 slide into
the Great Depression. But the Obama administration sees "green shoots"
sprouting all around and it offers hard evidence in the long-anticipated
results of its "stress tests" for major banks. Good news! Nobody is
insolvent.
Since last September, the Federal Reserve has increased its balance sheet by more than $1 trillion,
and has engaged in even much larger amounts of off-balance-sheet
transactions. In January of this year, freshman Rep. Alan Grayson repeatedly asked Federal Reserve Vice chairman Donald Kohn
the identity of the companies which had received those loans, only to
be told that the Fed had no obligation and no desire to disclose that
information to Congress.
Sam Rayburn, a longtime speaker of the U.S. House, once said, "Every
now and then, a politician ought to do something just because it's
right."
Last week, 45 U.S. senators dodged an excellent chance to do just
what Mr. Sam advised. At issue was a straightforward, common-sense
amendment proposed by Dick Durbin, D-Ill. It would have allowed
bankruptcy judges to help hundreds of thousands of financially strapped
homeowners who now find themselves trapped by exploding, exorbitant
interest rates that bankers had attached to their loans.
We are so inured to tales of business
corruption that even a devastating exposé in The Wall Street Journal no
longer shocks us. The fact that the chairman of the New York Federal
Reserve Bank made millions off his secret purchase of Goldman Sachs
stock, "in violation of Federal Reserve policy," as the WSJ put it, at
a time when the N.Y. Fed was ostensibly overseeing the antics of the
Wall Street firm, has barely registered a blip of outrage.
I'd like nothing more than to give the bailout scandal a rest - but
the bankers won't let me! They just keep coming at us with
ever-more-clever inventions of greed and deceit.
Their latest bit of hocus-pocus, accompanied by big puffs of smoke,
is a dazzling show of profits. Yes, Goldman Sachs, Citigroup, Bank of
America, JPMorgan Chase and other financial giants that only yesterday
were insolvent basket cases now report that - poof! - in the first
quarter of this year, they magically produced blockbuster profits.
Absolutely A-mazing!
Has Timothy Geithner ever had lunch with a
non-megamillionaire who has lost his job or home because of the banking
meltdown? I ask that question after reading the list of the treasury
secretary's luncheon dates when he was head of the New York Federal
Reserve, a list that the government was forced to provide in response
to a lawsuit.
On Friday, the Treasury
Department will share the preliminary results of its so-called "stress
tests" with the nation's troubled banks-but this week Timothy Geithner
missed another opportunity to open up the books and tell the American
public what's really happening with the country's financial system.
When the treasury secretary addressed the five-member panel overseeing
the Troubled Asset Relief Program on Tuesday, he stressed the
administration's commitment to "transparency, accountability, and
oversight." Then he proceeded to deliver a characteristically opaq
