Yeah, Tell Me Another One

There's an old joke in the Navy that goes like this:

Q. What is the difference between a fairy tale and a sea story?

A. A fairy tale begins with the words "once upon a time", while a sea story begins with the words "this is no shit."

This is no shit:

The completion of the stress tests and the pending capital raises by some institutions will mean that "banks can get back to the business of banking," Treasury Secretary Tim Geithner said in a conference call with reporters Thursday.

"This transparent, conservatively designed test should result in a more efficient, stronger banking system," Geithner said.

"Transparent and conservatively designed", my ass. Fed Chairman Bernanke and Secretary Geithner both have ample reasons to want to make certain that the so-called "stress tests" showed that the banks were basically sound. You'd have to be on some real mind-altering hallucinogens to pretend otherwise. Geithner and Bernanke were heavily involved in the bank rescues; the last thing that they are going to do is to stand up and say: "We examined the banks, we think most of them are going to fail in the next year or so."

I don't know if they will fail or not. What I do know is that just as I sure as shit would not trust the judgment of a ref who was betting on the outcome of a game, I don't have any trust in either one of those two worthies saying that "the banking system is sound, boss, you can trust me." They have too much incentive to rig the game.

So where does that put you, me and the economy? Hell if I know. My gut is that things are bad enough that they are willing to admit that 10 of the 19 largest banks are undercapitalized, then things could be a lot worse than they are saying.

Or maybe not.