"The effect of this capital assessment will be to help replace uncertainty with transparency. ... We chose a strategy to lift the fog of uncertainty over bank balance sheets and to help ensure that the major banks, individually and collectively, had the capital to continue lending even in a worse-than-expected recession." -- Treasury Secretary Timothy Geithner, May 2009
These tests did NOT bring transparency to the banking sector. They were practically designed to prove the banks were fine, and simply ignored off-balance-sheet and other dodgy assets. It was as if they were saying, "We will do whatever it takes (even lie) to make sure the big banks do not fail since Congress won't give us more money to fix them."
Since this "new wave of transparency," the banks have only raised a small portion of the capital they really need. What's more, the "worse-than-expected recession" Geithner spoke of assumed 8.4% unemployment. We are now looking at 10%.
Lesson for investors in 2010: The banking system is still, by historical norms, insolvent, led by big money-center banks such as Citigroup (C) and Wells Fargo (WFC).
Next: Lie #2: New Accounting Rules Show Banks Are All Right
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Reader Comments (Page 1 of 1)
12-26-2009 @ 3:58PM
setec5354 said...
Corruptions and Greed and Dirt is 100% alive and well exactly like Osama BinLaden and since 911 has never ever been able to kill capture or know his where-abouts.
Recession is 100% exactly like Japan's unable to make real recoveries.
Don't believe what I say,just watch the unfoldings of reality!!