Friday, April 24, 2009
I mean, really, we have to wait for the results of "stress tests" to know that Citibank's in serious trouble?
Now sure, there may be cause for concern that the few people who don't know about Citigroup's financial distress may suddenly become concerned about their savings, but (even without considering deposit insurance) I'm not anticipating a run on the bank. Talk all you want about investors fleeing the market or short-selling Citigroup stock, the fact that Citigroup isn't already in bankruptcy or hasn't already been taken over results exclusively from huge infusions of federal cash and the continued belief that the government won't allow Citibank to fail.
But on the other hand, will anybody be surprised when we learn that the government's grading on a very soft curve? Leaving aside the soft nature of the test itself, and whether or not it's an accurate gauge of a bank's viability, would you be shocked if Geithner announces that the results of the stress tests show that all of the banks examined are above average?