Talkingpointsmemo: 'Wall Street Fall' (What freaked them out was Geithner's 'stress test.'

[flpoljunkie]

Wall Street Fall

By Jon Taplin - February 10, 2009, 11:10PM

Everyone is saying the problem (the Wall Street sell-off) with the Geithner announcement was that it wasn't specific enough.

Nonsense.

What freaked out Wall Street was Geithner's "stress test". Unlike Paulson, Geithner is unwilling to give a bank money until he knows exactly what the stress tested balance sheet looks like. Unlike Ken Lewis of B of A, he's not going to buy a pig in a poke. There are so many worthless securities in these banks that they aren't confessing.

What Wall Street is waking up to is the fact that a lot of bank stockholders are going to get wiped out, because, if the stress test is good, a lot of banks are currently insolvent.

What Barack and Tim need to do now is to get Warren Buffett and Peter Lewis to say their firms will work with the Aggregator JV to buy paper from banks that pass the stress test with an equity kicker for the fund.

http://tpmcafe.talkingpointsmemo.com/2009/02/10/wall_street_fall/

[Phoebe Loosinhouse]

1. I agree - who looks forward to a "stress test"

I posted yesterday that in a bank stress test:

Some will drop dead. Some will be on mechanical assistance until their vital organs can be harvested and transplanted. Some will get transplants and therapy and learn to live an almost normal life. Some will simply be put on a healthier diet and told to make better choices.

Some in the comments of the TPM link asks what would happen to the CDO's and called them "virtual assets" with nothing really behind them. I have also heard them called an illegal and unregulated "insurance" product.

This mess is going to take a long time to unwind and wind down.

[dkf]

3. CDOs? Or CDS?

CDOs are collateralized debt obligations, basically cut up asset backed securities.

CDSs are credit default swaps, which are like insurance, but without the regulations needed to make sure it can be paid.

Both are problem assets, but they are quite different.

[leveymg]

2. Why does America need $5 Trillion worth of junk? Failed design. Unsafe. Scrap it and start over

Wall Street, 2009.

[screembloodymurder]

4. I think the real objection was the reporting.

Wall Street doesn't like dealing above the board and in the open.

[Bread and Circus]

5. I figured the selloff had to do w/ the fact that Obama wanted to take a peak behind the curtain...

What exactly are they hiding?

IMO this means Obama and Geitner are on to something.

[Clio the Leo]

6. Yup, that pretty much sums it up. NT