Paul's Here

Stress Test

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Dear Mr. Geithner,

My stress test I just took revealed I need about $4 million dollars. Please contact me to determine how best to allocate it among my investments. You'd get my good will in return.

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On a more serious note, does anyone know what the stress test of the banks consisted of? Seems like they need $75B.

“With the clarity today’s announcement will bring, we hope banks are going to get back to the business of banking,” Treasury Secretary Timothy F. Geithner said during a news briefing on Thursday afternoon.

Mr. Geithner noted that banks had a long way to go to restore the nation’s confidence in the financial industry, and that they could get a start in generating good will by lending more.

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The quick answer on this odd "stress test" business is that in some important sense the free market and capitalism has FAILED. American individuals, investors, institutions, pundits, etc. should have demanded that the banks come clean, open up their books, become more "transparent," etc. after the March 2008 Bear Stearns failure or at least the September 2008 Lehman Brothers failure. Any bank which obstanently refused to be forthcoming should have experienced a severe run on its accounts, and a vast sell-off of its stock.This, in turn, would have put them out of business. Good, sound, solvent banks would have replaced incompetent and secretly-bankrupt ones.

How sad that a bit of desperately-needed transparency is obtained via mostly round-about, incompetent, untrustworthy government coercion. We needed a private sector "stress test" 14 months ago -- if not 14 years ago!

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"Mr. Geithner noted that banks had a long way to go to restore the nation’s confidence in the financial industry"

Whatever confidence I've lost in our financial industry can be traced directly to the current government manipulation of said industry. Sure, there were some shady tactics being used but they pale in comparison to what all this artificial manipulation is doing. Rahm Emanual stated that you should never let a crisis go to waste and I agree to a point (but only to a point). The problem I have is that the far left has shot steroids into this crisis and created a monster they cannot control.

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The quick answer on this odd "stress test" business is that in some important sense the free market and capitalism has FAILED. American individuals, investors, institutions, pundits, etc. should have demanded that the banks come clean, open up their books, become more "transparent," etc. after the March 2008 Bear Stearns failure or at least the September 2008 Lehman Brothers failure. Any bank which obstanently refused to be forthcoming should have experienced a severe run on its accounts, and a vast sell-off of its stock.This, in turn, would have put them out of business. Good, sound, solvent banks would have replaced incompetent and secretly-bankrupt ones.

How sad that a bit of desperately-needed transparency is obtained via mostly round-about, incompetent, untrustworthy government coercion. We needed a private sector "stress test" 14 months ago -- if not 14 years ago!

I cannot agree with this. Would you want somebody to go snooping around in your personal finances simply because we feel you need to "come clean" and we're at your doorstep with pitchforks? And what if you steadfastly refuse to let others look at your "books?" Should we then all shun you for "obviously" having sinned? The problem with banks is not a lack of transparency. The problem is that individuals are no longer able to decide for themselves what money is. Nor are they completely free to decide how to earn, save, and spend it.

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Dear Mr. Geithner,

My stress test I just took revealed I need about $4 million dollars. Please contact me to determine how best to allocate it among my investments. You'd get my good will in return.

--------------------------

On a more serious note, does anyone know what the stress test of the banks consisted of? Seems like they need $75B.

“With the clarity today’s announcement will bring, we hope banks are going to get back to the business of banking,” Treasury Secretary Timothy F. Geithner said during a news briefing on Thursday afternoon.

Mr. Geithner noted that banks had a long way to go to restore the nation’s confidence in the financial industry, and that they could get a start in generating good will by lending more.

I'm uncertain as to what the stress tests actually "did" to determine their numbers. Probably something that involved calculus...

The biggest problem to me is that these tests were conducted to see what banks would get "permission" to return TARP money to the treasury. If I were a bank CEO I'd hire armored cars to bring in the money. Money which I would personally pile quite literally on the treasury's steps by driving the fork lift. I'd then tell the Treasury to come and get its money, or I'm giving it back to the American people.

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Would you want somebody to go snooping around in your personal finances simply because we feel you need to "come clean" and we're at your doorstep with pitchforks? And what if you steadfastly refuse to let others look at your "books?" Should we then all shun you for "obviously" having sinned? The problem with banks is not a lack of transparency. The problem is that individuals are no longer able to decide for themselves what money is. Nor are they completely free to decide how to earn, save, and spend it.

No longer able to "decide what money is?" I have no idea what this means.

I don't want to threaten banks "with pitchforks." But if Banks A, B, and C are all heavily invested in subprime mortgages and other dubious exotic "financial instruments" -- and they thus refuse to lend to each other -- then I think the banks are very possibly secretly bankrupt. An intelligent, perceptive, wise, and prudent world needs to demand that they prove otherwise.

But that didn't happen. That's why I call it a FAILURE of the free market and capitalism. And this incompetence is on-going. Where are the financial experts and leading intellectuals screaming for Big Finance transparency? With enough openness, this strange "frozen credit" and "lack of confidence" crisis could be over tomorrow. Our mini-Depression too.

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But that didn't happen. That's why I call it a FAILURE of the free market and capitalism. And this incompetence is on-going. Where are the financial experts and leading intellectuals screaming for Big Finance transparency? With enough openness, this strange "frozen credit" and "lack of confidence" crisis could be over tomorrow. Our mini-Depression too.

Zeus, I am not sure that I understand exactly what you are stating. Are you actually stating that you think that the free market and capitalism failed or that you think that is what the stress testors are attempting to get people to think?

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Would you want somebody to go snooping around in your personal finances simply because we feel you need to "come clean" and we're at your doorstep with pitchforks? And what if you steadfastly refuse to let others look at your "books?" Should we then all shun you for "obviously" having sinned? The problem with banks is not a lack of transparency. The problem is that individuals are no longer able to decide for themselves what money is. Nor are they completely free to decide how to earn, save, and spend it.

No longer able to "decide what money is?" I have no idea what this means.

I don't want to threaten banks "with pitchforks." But if Banks A, B, and C are all heavily invested in subprime mortgages and other dubious exotic "financial instruments" -- and they thus refuse to lend to each other -- then I think the banks are very possibly secretly bankrupt. An intelligent, perceptive, wise, and prudent world needs to demand that they prove otherwise.

But that didn't happen. That's why I call it a FAILURE of the free market and capitalism. And this incompetence is on-going. Where are the financial experts and leading intellectuals screaming for Big Finance transparency? With enough openness, this strange "frozen credit" and "lack of confidence" crisis could be over tomorrow. Our mini-Depression too.

The only way your arguments can be construed to show this crisis is a FAILURE of the free market and capitalism is to assume capitalism or the free market should guarantee rational action, which is obviously not the case, as your arguments show. What capitalism and the free market do guarantee (to as great an extent as possible) is that the consequences of irrational behavior are suffered only by those responsible for it. It is government intervention in the economy that has caused the situation to be a "crisis" for the nation and even world as a whole.

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Would you want somebody to go snooping around in your personal finances simply because we feel you need to "come clean" and we're at your doorstep with pitchforks? And what if you steadfastly refuse to let others look at your "books?" Should we then all shun you for "obviously" having sinned? The problem with banks is not a lack of transparency.

I don't want to threaten banks "with pitchforks." But if Banks A, B, and C are all heavily invested in subprime mortgages and other dubious exotic "financial instruments" -- and they thus refuse to lend to each other -- then I think the banks are very possibly secretly bankrupt. An intelligent, perceptive, wise, and prudent world needs to demand that they prove otherwise.

Bankruptcy is the inability to pay one's bills, which cannot remain "secret" in a free market, i.e., without government covering it up, which is exactly what Bernanke, Paulson, et al tried to do. They are the ones with the "pitch forks" pushing people around and hiding the nature of their government policies from the public. It is Obama, 'Geithner the Fascist Elf', et al who are manipulating the economy and maneuvering for government ownership and control as a replacement for bankruptcy.

An "intelligent world" needs to be demanding acccountability from government, not "demanding" to pry into private businesses and "demanding" that private businesses "prove" anything to damagogues and mobs.

But that didn't happen. That's why I call it a FAILURE of the free market and capitalism. And this incompetence is on-going. Where are the financial experts and leading intellectuals screaming for Big Finance transparency? With enough openness, this strange "frozen credit" and "lack of confidence" crisis could be over tomorrow. Our mini-Depression too.

It is not a failure of the free market and capitalism; it is another failure of government intervention in the economy. The "lack of confidence" referred to by Obama and his cohorts is the ginned up "lack of confidence" in business that the demagogues have created as they shift the blame from government to private business, which they want eliminated and subjected to fascistic control as a matter of policy. That is not the same "lack of confidence" that legitimate banks hold in their fear of government and fear that borrowers will not be able to pay back their loans in a government-manipulated economy in which production is claimed not to be needed prior to consumption.

For an explanation of the causes of the breakdown of the financial system, listen to the ARC lecture by BBT's John Allison.

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Here is another article on how Obama and his thugs are "intervening" in the economy, i.e., brutally nationalizing it while demonizing, intimidating and destroying their victims. It was first posted on the Forum by Bill Bucko here.

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Would you want somebody to go snooping around in your personal finances simply because we feel you need to "come clean" and we're at your doorstep with pitchforks? And what if you steadfastly refuse to let others look at your "books?" Should we then all shun you for "obviously" having sinned? The problem with banks is not a lack of transparency. The problem is that individuals are no longer able to decide for themselves what money is. Nor are they completely free to decide how to earn, save, and spend it.

No longer able to "decide what money is?" I have no idea what this means.

Individuals and institutions such as banks and corporations are not free to decide what they will consider as money. There are laws which legally define the currency of the United States. Those laws wouldn't be such a bad thing if they simply defined what a dollar is (such as the historical example of the so-called gold standard which simply stated that one dollar was 1/20th an ounce of gold). However, since the early 1970s the government has abandoned all pretense at a rational currency and the dollar is now the fiat of government.

I don't want to threaten banks "with pitchforks." But if Banks A, B, and C are all heavily invested in subprime mortgages and other dubious exotic "financial instruments" -- and they thus refuse to lend to each other -- then I think the banks are very possibly secretly bankrupt. An intelligent, perceptive, wise, and prudent world needs to demand that they prove otherwise.

But that didn't happen. That's why I call it a FAILURE of the free market and capitalism. And this incompetence is on-going. Where are the financial experts and leading intellectuals screaming for Big Finance transparency? With enough openness, this strange "frozen credit" and "lack of confidence" crisis could be over tomorrow. Our mini-Depression too.

I'm amazed that anyone could think that there needs to be more "transparency" when it comes to our banking industry. They are required by law to issue public statements of their financial condition on at least a quarterly basis. These reports are scrutinized by hordes of professionals trying to correctly value a company and correctly understand its financial position. There are also a host of government bureaucrats that constantly monitor every step the banks take to "ensure the safety of the public." Not to mention the media attention that is given to any prominent businessman who even feigns a mistake. How much more open do you want their books!?

Besides, the credit markets aren't frozen. One could still obtain a loan if they are in a position to pay the requisite price for it. I know of a couple people who have in the past six months taken out sizable loans to purchase homes. Now, the price that must be paid for a loan has gone up in the form of "tighter" qualifications. But to ask anybody to make a loan on "looser" terms than they want is to ask for a sacrifice. And this is all beside the point because most Americans are actually paying off their debt at the same time and for the same reasons that banks are loaning less.* Contrast this rational approach to the one offered by the Obama administration which wants us all to spend and not save, and encourages banks to give out loans indiscriminately as if the way to get rid of crippling debt is to pay it off with another larger loan that one cannot pay because they spent all their money at the mall!

* This is to be expected as the correct thing to do in tough times. The borrower will by paying off debt will increase his disposable income in the short run and potentially increase his savings in the long run. By increasing the qualification terms for a loan or increasing the interest rate on loans the banks are doing something similar and increasing short run income and long run savings. In effect, our society has decided (one individual and business at a time) to increase their rate of savings or capital accumulation. It is also an attempt for society (though everybody decided on their own) to try and counteract the amazing amount of destruction and confiscation of wealth of recent government actions.

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Those who have some financial education, and believe that capitalism failed, should listen to this (It's pretty technical, IMO. My B.A. was in liberal arts, with a minor in Economics, and I had to go through it slowly, stopping to ask questions of someone better educated than I am in business and finance):

The Financial Crisis: Causes and Possible Cures - by John Allison - Jan. 29, 2009

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