The TARP oversight panel, led by medical bankruptcy alarmist Elizabeth Warren, thinks it’s about time to redo the strest tests. Just talked to banking guru Bert Ely about this. He had a number of objections including a) allowing the repayment of$68 billion TARP money probably means the government is already factoring in worsening economic conditions , b) it raises the possibility of reigniting investors anxiety, and c) it continues the politicization of the bank via government control. To what end? To keep the banks under the thumb of Uncle Sam and influence lending. If you control credit allocation, you control the economy.
That is is the insta-conclusion of Newt Gingrich. What you can say, I think, is that the administration appears to have been overly optimistic. Indeed, Obama advisers are already admitting that. The economic forecasts driving the stimulus package were too rosy, as was the “stress test” worst case scenario. And had Team Obama been gloomier — as gloomy as the Inauguration Day speech, say — would their policies have been different, would they have followed the advice of folks like Paul Krugman and Robert Kuttner and pushed for a much bigger stimulus package? Or would they have at least front loaded the existing stimulus package by increasing the emphasis on tax cuts vs. “investment” spending? Perhaps. But the gamble they took was to let the Fed pretty much handle the near term (and avoid a depression) while they would focus on bolstering the economy for the longer term and pushing through their policy agenda.
Nouriel Roubini tries to grind his heel into the green shoots:
First, employment is still falling sharply in the US and other economies. Indeed, in advanced economies, the unemployment rate will be above 10% by 2010. This will be bad news for consumption and the size of bank losses.
The San Francisco Fed paints a gloomy outlook for the U.S. labor market with unemployment hitting near 11 percent next year and above 9 percent through 2011(bold is mine):
Here is a bit from Meet the Press from May 31 (pointed out by David Henderson) where David Gregory interviews a gloomy Anne Mulcahy, CEO of Xerox:
1) Since bottoming in February, consumer confidence has had the fastest three-month increase on record. 2) The ISM manufacturing index, which fell to historic lows over the winter, has climbed from its hole to signal that the overall economy is now expanding. 3) The Richmond Federal Reserve index, a measure of manufacturing in mid-Atlantic states, is showing growth. 4) Container shipments both into and out of the ports of Los Angeles and Long Beach – key measures of international trade – have traced a V-shaped recovery. 5) In the financial markets, the yield on the 10-year Treasury note is back up to 3.86%, almost exactly where it was in August 2008, just before the crisis hit. 6) The VIX Index – a measure of stock market volatility and risk – has also traded back to levels not seen since August 2008. 7) Meanwhile, key commodity prices, such as oil, copper, lumber, and gold are well off crisis-period lows.Their bottom line:
In the last full calendar quarter before September (the second quarter of 2008), real GDP grew at almost a 3% annual rate. This is exactly what we expect for the third quarter of 2009 – 3% real GDP growth – with even faster economic growth in Q4 and then in 2010.