Hear: Geithner's Stress Test

Planet Money Podcast

On today's Planet Money:

If any single human being stands at the center of the global economic crisis, it's U.S. Treasury Secretary Tim Geithner. This afternoon, Geithner took his hands off the intricate machinery long enough for an interview with Adam Davidson.

Big banks get ready for stress tests... "We've always worked with banks to make sure that they're healthy and stable, and we're going to work with them. I don't see any reason to destroy the franchise value or to create the huge legal uncertainties of trying to formally nationalize the bank when it just isn't necessary," Bernanke told senators on Tuesday.

"The outcome of the stress test is not going to be fail or pass," added Bernanke, whose agency is the primary regulator for many of the country's largest banks. "The outcome of the stress test is, how much capital does this bank need in order to meet the credit needs of borrowers in our economy?"

It seems like every time the Secretary of treasury makes an appearance before a congressional committee or the President makes a speech, the market goes down. Is this now a new fool proof indicator?

geithner's stress test approach is the smartest and best long term solution to the banking crisis. at the NY FED, he started calling for this years ago. and it is not going to be a one time event, either: they are going to make this the standard protocol. the banking system will be healthy and visible: this is tremendously bullish for the economy and the markets and the country and the world.

Edited by humble1, 26 February 2009 - 03:53 AM.

Now the FDIC joined in.

Banking regulator says U.S. not pursuing nationalization
Sheila Bair