Paul Krugman raises a point worth thinking about as you hear more about stress test results for banks, which are expected to be publicly disclosed on Thursday. Why have so many of the results already been leaked — and who is doing the leaking? For example, we’ve known since last week that Citigroup and Bank of America have been singled out in particular as needing more capital.
Traditionally, leaks to the press come from officials trying to curry favor with journalists, who will treat them favorably in the future. (See Woodward, Bob.) But that’s kind of hard to see as a motive in the case of the relevant economic officials here — possible, or maybe it’s people on the political side of the White House, but it doesn’t feel right.
Alternatively, there’s Yves Smith’s version: these are all trial balloons to see how outsiders will react to different stress reports.
But that just adds to the bad feeling about all this. Even Brad DeLong, who has been relatively sympathetic to the administration here, is disturbed by the idea that regulators are negotiating with the banks about the test results. Now it seems as if the report’s contents may also be dictated by what, based on the response to leaks, the informed public is willing to swallow. (”Would you believe it if we say Citi is fine? OK, what if we say they need $5 billion? Not enough? How about 10?”)
It does make you wonder if the fix is in, even before the results of the stress tests are out.
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School of Hock
A growing number of college grads are defaulting on their student loans as the economy worsens.