In his hide-and-go-seek testimony before the Congressional Oversight Panel, Secretary of the Treasury Geithner said that the “vast majority” of banks have more capital than they need. He did not say which banks were left out of that circle of safety, leaving the impression that extremely large financial firms like Citigroup (C) and Bank of America (BAC) may still be in trouble. If five of the ten largest banks in America have problems, it hardly matters how the rest are doing.
Geithner has been adroit at withholding small but important pieces of information from Congress in the name of preventing panic. If he names a bank that has problems, investors may sell its shares to zero. If he tips his hand a bit when he calls his projections “conservative”, what are the real numbers?
The fact of the matter is that Geithner has not been willing to disclose the most critical numbers in his models, the models that tell him and his colleagues that most banks are flush. Are they based on the 10% unemployment levels in the “stress test” packages? What do they assume about falling home prices? And, what writedowns do banks face which are related to exposure to assets other than toxic mortgage paper, assets like commercial real estate loans, LBOs, and consumer credit cards?
Testifying before Congressional overseers giving half-answers is simply a charade as long as most of the important details behind the Administration’s plans stay secret.
Douglas A. McIntyre
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