Treasury Secretary Timothy Geithner is betting that U.S. banks can do something their Japanese counterparts were unable to accomplish in that country\u2019s \u201clost decade\u201d of the 1990s: earn their way out of trouble.<\/p>\n
The stress-test results released yesterday by regulators found that the 19 largest banks face a $74.6 billion capital hole that may be filled mostly by private money. That compares with the hundreds of billions of dollars seen by outside analysts, including the International Monetary Fund, and takes into account banks\u2019 projected earnings over the next two years.<\/p>\n
The \u201cstress-test results are an important step forward,\u201d Geithner said in a statement announcing the results. \u201cAmericans should know that the government stands behind the banking system and that their deposits are safe.\u201d<\/p>\n
…<\/p>\n
Geithner told reporters that regulators took a conservative approach to toting up potential credit losses and calculating the industry\u2019s ability to absorb them through increased earnings<\/span>. The forecast of future profits was at the \u201cquite low end of analysts\u2019 expectations,\u201d he said. <\/p><\/blockquote>\n
(emphasis mine)<\/p>\n
<\/span>It is quite literally all a confidence game to him: If he can convince the American public to maintain their confidence in the banking system, then they will make so much money, from those FDIC subsidized loans, I guess, that they will earn their way out of this.<\/p>\n
It’s also clear that the “stress test” was intended as a confidence building measure, whether it is justified or not.<\/p>\n
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When you look at the dictionary for the definition of “