Word: stressful
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...losses from the bonds held by banks may be covered by the TARP capital they have received from the government or the money that they have been asked to raise as a result of the "stress test" process. That leaves the more important issue of what it means when the financial distress of the wealthy and nearly wealthy begins to look like the money problems of everyone else. The country counts on the rich for a large portion of it tax receipts. The new budget assumes that upper income households will pay an even larger part of their earnings each...
From his earliest days as Treasury Secretary, Tim Geithner's biggest challenge has been restoring confidence in America's fragile banks without taking the politically costly step of asking Congress for more money. To judge by the results of the government-run stress tests released Thursday afternoon, Geithner has somehow pulled it off - at least...
...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. He points to the recent IMF report that estimated $2.7 trillion in U.S. loan and security losses, and his own estimate of $3.6 trillion for the same potential losses. "The financial system is currently near insolvency," he concluded. Bernanke disputes the numbers, saying banks have "taken significant...
...banks of toxic assets. Until now, banks have resisted selling the highly securitized, largely illiquid toxic assets, arguing they're worth more than the current fire-sale prices being offered on the open market. But taking them off the banks' books is key to restarting lending, and the stress tests' mandate to boost capital may be enough to get the process started...
...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...