Prairie Home TARP test—Where ALL the banks are above average

The bank ‘stress test’ results announced today are complicated enough to look like arcane technical pronouncements by finance geeks. But given the importance of convincing public and investor opinion that All Is Well, they sound more like a door-to-door sales pitch.

A good indication is Geithner’s comments to Charlie Rose about ‘very significant cushions’ in the banks so that ‘all Americans should be confident’ about their viability. (I notice he didn’t use the word solvency.) ‘The results will be, on balance, reassuring’, said Geithner, referring to his primary function: to reassure us. Given that the bank managers themselves have had opportunities galore to comment on and—dare we suggest?—shape the conclusions, Geithner is simply asking us to Believe. Maybe the banks are solvent, and maybe they aren’t; Geithner’s and Obama’s bet is that they can convince us of the former and thereby stave off politically costly new rescue measures utilizing our money.

If they are being mostly truthful, we’ve probably not lost our $2 trillion or not all of it anyway. But as David Corn at Mother Jones and many others have pointed out, we really don’t know much—certainly nothing about where all that cash went—and no one at the Treasury Department or the White House wants us to find out.

The fast-food headlines paint a convenient picture: a range from ‘troubled’ banks like Citi and Bank of America needing yet more billions to a few requiring far lesser amounts and others declared quite ‘healthy’ overall. The news-cycle impression will be of a mixed report card with some D’s (to avoid generating guffaws of disbelief), some C-plusses and quite a few respectable B’s. In short, things are looking better and better (cue: ‘Always Look on the Bright Side’ starring Monty Python characters nailed to crosses).

But the econo-blogs are parsing the statements down to far less sanguine conclusions. Starting with the worst basket case, Bank of America announced it needs another $34 billion on top of the $45b already received under TARP.

Citigroup needs ‘only’ $5b, but then again it already received $50b plus loan guarantees. And so forth.

Then there are the boys with nice report cards like JP Morgan Chase, Cap One and American Express. They got TARP money in the early days of that mysterious program when we were told only already healthy banks could line up at the trough. They are now solemnly re-declared healthy while in possession of the public cash pumped into them, so were they really healthy then? Or they weren’t then but are now? Or both? Or neither?

Despite the worst financial panic since the 1930s, not one of these institutions is slated for dismemberment a la General Motors or Chrysler. The holy marketplace gets no chance to smack the stuffing out of the wild-man investors or dun the irrationally exhuberant for bad gambling debts. Instead, we get the worst form of warped socialism: banks get the gain, we get the pain.