Friday, May 8, 2009
Time Magazine assesses Geithner and the stress tests in a reasonably honest article entitled "Stress Tested: Has Geithner's Bank Confidence Game Worked?".
A "confidence game" is, of course, just the formal name for a con job.
In a remarkable bit of salesmanship, Geithner has managed to package [the negative realities regarding the banks' health] as positive...
Facts are important too, and some think Geithner and the government are fudging them. Nouriel Roubini, the hard-headed pessimist who foresaw the financial crisis, wrote Tuesday in the Wall Street Journal that the overall positive message of the stress tests "would be good news if it were credible," but it's not...Roubini is not alone in questioning whether the government used appropriately pessimistic assumptions in conducting the stress tests, especially as the financial sector faces a potential flood of commercial real estate losses that could mirror the residential market's recent woes.
Still, even if the numbers are based more on positive thinking than cold hard facts, it's tough not to be impressed by what Geithner and company have accomplished. In addition to the boost in public confidence, they've apparently figured out how to get the banks to support Geithner's other iffy program, the one designed to rid banks of toxic assets.[GW's Comment: This is the program where the banks are buying each others' toxic assets so they can dump the tab on the American taxpayer]
All of which goes to show that whatever his faults, Tim Geithner knows how to game America's confidence in the banking system. But does that mean the stress tests themselves are one big confidence game? Perhaps. The playwright David Mamet said such scams get their name not from the confidence the victim places in the con man, but the trust the con man pretends to place in the victim to elicit trust in return. By that standard, Geithner may be the most effective con man around, for better and for worse.