Break the Banks, Buy the Banks?
Hoping for Plan Behind the “Stress Test”
I’m really hoping that the Obama Administration’s recently announced “stress test”—where they will simulate Great Depression conditions by computer and see what would happen to each major bank in that scenario—is just an excuse to nationalize the banks.
I’m really hoping that the Obama Administration doesn’t ACTUALLY naively think that despite a wide consensus about the lack of soundness in these banks (and more significantly, the market’s complete lack of faith in them), that these banks will come out of the stress test even close to looking like they’re ready for such conditions. Or even solvent at all.
I’m hoping that since they are expecting it, they should have a plan (which has been curiously absent so far).
What I’m hoping for is that after the Treasury and Administration moan and groan about how much worse these banks are than anyone could have predicted, they now have no choice but to nationalize them. Gets rid of the political liability if you make crystal clear to everyone that these banks are underwater and effectively dead, in financial terms. Plus, you insulate yourself from objection to doing so if you hide it as an attempt to “save the banks” first.
I’m hoping for all of this since if it isn’t the case, the Administration will have shown the world that these banks are not solvent, they’ll have no plan to stop their now immediate collapse, and all the President’s men will not be able to put Humpty-Dumpty back together again.
After all, now that they’ve started this, they can’t go back. They already said they’d reveal the results. If they don’t, what do you think that everyone else will think the results say?
