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[Geithner Stress] SNL Calls Out The Low-ball Exercise of Ignorant Bliss

Kudos to SNL for being able to carry this off – it’s as good as an earlier Geithner skit [1].

Robert Kuttner, in his piece in the Huffington Post called Collateral Damage and Double Standards [2] writes about a recent Fed conference on the stress test:

At one point in his remarks, Bernanke, recounting just how rigorous the stress tests were, explained that “More than 150 examiners, supervisors, and economists” had conducted several weeks of examinations of the banks. That kind of let the cat out of the bag. If you do the arithmetic, that is about seven supervisors per bank, and all of the stress-tested 19 banks were hundred-billion and up outfits. When an ordinary commercial bank, say a $10 billion outfit, undergoes a far less complex routine examination of its commercial loan portfolio, it involves dozens of examiners.

So the stress test was not a set of rigorous examinations at all, but a modeling exercise using the banks’ own valuations of their assets.

It’s kind of like trying to help the economy by providing aid to large corporations who are most visible, yet represent only a small portion of the economy. On second thought big banks don’t represent a small part of the economy so I guess I am referring to the absence of help to a large portion of the banking system – lenders with less than $10B in assets.

A slow leak of information, talk of green shoots and glimmer fill the headlines when it comes to banking. It’s $75B rather than $3.6T [3] we should probably be talking about.

Why does this matter to real estate? Cause it’s linear.

Banks => Credit => Housing

Actually I am not sure I disagree with the Geithner/Bernanke mindfreak [4] that we are seeing since it seems to be helping restore some confidence in the future of the economy. I guess I get irritated when I know am being managed or perhaps, (my) ignorance would be bliss (ful).