Krugman Tempers His Tune

If you read Paul Krugman week to week, you know he isn't a fan of Timothy Geithner or Geithner's plan but in his column today, you can tell that he's softened his stance on the banking fix by a wee little bit:

But whether you actually should feel reassured depends on who you are: a banker, or someone trying to make a living in another profession.

I won’t weigh in on the debate over the quality of the stress tests themselves, except to repeat what many observers have noted: the regulators didn’t have the resources to make a really careful assessment of the banks’ assets, and in any case they allowed the banks to bargain over what the results would say. A rigorous audit it wasn’t.

But focusing on the process can distract from the larger picture. What we’re really seeing here is a decision on the part of President Obama and his officials to muddle through the financial crisis, hoping that the banks can earn their way back to health.

It’s a strategy that might work. After all, right now the banks are lending at high interest rates, while paying virtually no interest on their (government-insured) deposits. Given enough time, the banks could be flush again.

But it’s important to see the strategy for what it is and to understand the risks.

That softening up says to me, Geithner's plan might actually be working out after all. Sure seems to be. The left often uses guilt by association to condemn Geithner, which is odd, seeing that they're the left and they're supposed to know better.
Geithner on Charlie Rose:

Watch the full episode here.

Obama: Serious Bank Risk Means Serious Oversight

Obama talks regulatory reform today. Read about it here. Watch:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Looking at the nationalization debate, which is really a time waster. It doesn't matter what you call it:

Former FDIC chair Bill Isaac's 2 cents:

Banks To Get Tested For Stress

Zina Saunders' zombie banker

NYT: The Obama administration will begin taking a hard look at the financial condition of the country’s 20 biggest banks this week to judge whether they could hold up even if the downturn worsens further than policy makers already expect.

These reviews of the banks’ books, known as “stress tests,” are heightening a dilemma for Obama aides about how candid they should be about the health of banks like Citigroup and Bank of America. The tests are expected to take several weeks.

Bank shares were pummeled last week, partly because of rumors that the government might nationalize some of the banks. Officials consider many of the top 20 banks “too big to fail.”

The tests come as anxiety is building among investors and industry analysts about the Treasury Department’s broader plan to shore up the banking system. People familiar with the plan, which has been criticized by executives and analysts as vague, say its crucial details may not be ready for another few weeks.

If they're about to keel over, then... just don't say nationalization:

Top advisers to President Obama, including the Treasury secretary, Timothy F. Geithner, have insisted repeatedly that they want to keep the major banks in “private hands” and have no intention of nationalizing them. But because the tests involve nightmarish economic conditions, the results of the tests are likely to strengthen the case that some of the major banks need more capital. That would increase the likelihood that the government would increase its stake and dilute or even wipe out the shares held by private investors.

Citigroup is in talks for... just don't say nationalization... but that's what it is when the government takes a larger stake. Fire the bums!

The lessons from Sweden.

There are a lot of myths about nationalization. 

What Sweden's nationalization wasn't.