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Thursday: Geithner channels Alfred E. Newman

Tim Geithner takes optimism to the next level

Tim Geithner takes optimism to the next level

I’m plugging Planet Money again today.  I simply *love* these guys.  Their podcasts reveal as much about the bizarre atmosphere surrounding the economic meltdown as the situation itself and its major players.  Gee, I hope they continue to get the high level guests after this last episode with Tim Geithner.  As I said before, Planet Money doesn’t seem to be into propaganda but they are keen observers.

So, Tim Geithner gives Planet Money an interview and he brings along a press aide.  As the producer mentions, during parts of the interview, you can hear the aide whispering to Geithner while he speaks as she keeps him relentlessly on message.  Too funny.  Or disturbing, because what Geithner says about “stress tests” makes you wonder- why bother?  According to Geithner, the government will begin to stress test several banks with the worst case scenarios.  They’re going to be tough and thorough, you betcha.  And if the stress test shows that the bank is troubled, we’re going to rescue them so they stay in private hands.  Even iffen they don’t need a lot of rescue, we’re going to rescue them so they stay in private hands.  Whatever the outcome, we’re going to save them- for the private sector, so don’t you worry your pretty little taxpayer heads because the banks will stay in private hands.  Of that, you can be sure, bynettyjingo!

What if the stress test shows the banks need to be nationalized?

We will save them for private hands!

The message seems to be pretty unambiguous:  No matter what the stress test reveals, the banks shall remain private.  This is meant to be reassuring to us, the taxpayers but if I were a banker, I’d be *doubly* reassured.  In fact, I might just ease up on the xanax and take a mini vacation to someplace warm.

It’s all going to be just fine.

If it weren’t for Paul Krugman always trying to harsh Geithner’s mellow.  Paul quotes Adam Posen about Japan again.  Says Posen:

Pretending that distressed assets are worth more than they actually are today for regulatory purposes persuades no one besides the regulators, and just gives the banks more taxpayer money to spend down, and more time to impose a credit crunch.

These kind of half-measures to keep banks open rather than disciplined are precisely what the Japanese Ministry of Finance engaged in from their bubble’s burst in 1992 through to 1998 …

What a frickin’ crepe hanger.

In the meantime, the banks will take our money and get back to us on it someday in the future.