Stress Test

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STRESS TEST….Matt Yglesias comments on today’s Nick Kristof column on the economic meltdown:

As he says “the larger conundrum is that a bailout is both: A) urgent and essential; and B) unfair and unpopular.” Thus far, officials have attempted to resolve that conundrum with timidity, but ultimately that results in measures that fail on both counts. What’s needed is more boldness — really decisive action to clean up the financial sector combined with measures that are tough enough on CEOs and shareholders to give the effort political legitimacy.

OK, but here’s the problem: you also have to do this in a way that’s at least nominally fair.  And the process has to be fairly transparent.  If you ask Vikram Pandit right now if Citigroup is solvent, he’ll tell you it is — and he’ll then haul out a detailed PowerPoint presentation to prove it.  Citigroup’s internal numbers suggest that they’re well capitalized and in no need of being taken over.

Now, those numbers are almost certainly hooey.  Certainly investors don’t believe them, and to register their disbelief they’ve driven Citigroup stock down to almost nothing.  Nonetheless, the numbers are there, and the government can’t be in the business of taking over banks that swear on a stack of Bibles that they’re perfectly healthy.  This, I assume, is the point of Tim Geithner’s stress test.  In the same way that the Swedes set up a transparent process to evaluate their banking sector in the early 90s and ended up nationalizing two banks but not the others, Geithner needs to set up a process that does the same here.  If the process is seen as fair, there will be way less political blowback when some of the big banks are taken over and others aren’t.

This, anyway, is the optimistic point of view: that Geithner and Obama, far from being unwilling to nationalize insolvent banks, are merely setting up the political and financial process to make it tolerable in the near future.  The pessimistic view is that they’re just screwing around and don’t really have any plan at all.  For the moment, then, I plan to take the optimistic point of view just for the sake of my own mental health.  Your mileage may vary, of course.

SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

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SIX TRUTHS

Reclaiming power from those who abuse it often starts with telling the truth. And in "This Is How Authoritarians Get Defeated," MoJo's Monika Bauerlein unpacks six truths to remember during the homestretch of an election where democracy, truth, and decency are on the line.

Truth #1: The chaos is the point.

Truth #2: Team Reality is bigger than it seems.

Truth #3: Facebook owns this.

Truth #4: When we go to work, we're in the fight.

Truth #5: It's about minority rule.

Truth #6: The only thing that can save us is…us.

Please take a moment to see how all these truths add up, because what happens in the weeks and months ahead will reverberate for at least a generation and we better be prepared.

And if you think journalism like Mother Jones'—that calls it like it is, that will never acquiesce to power, that looks where others don't—can help guide us through this historic, high-stakes moment, and you're able to right now, please help us reach our $350,000 goal by October 31 with a donation today. It's all hands on deck for democracy.

payment methods

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