Already leaked news of Bank Stress Tests was made formal this week. Big numbers – potential losses of $600 Billion by end of 2010 if Economy goes to tanker and $75 Billion needed by banks to beef up their capital base. The number $75 Billion is conveniently within the range of how much of TARP money is left – around $135 Billion. So Sec. Geithner ensured that he will not have to go to Congress with a bowl for more money for banks. Many Banks already declared secondary and the stock still went up! So of these $75 Billion, except for GMAC, Fed may not need to put in any money if Market holds and keeps on creeping upward.
It is politically convenient for Pres. Obama that without public declaring a victory, he essentially solves the banking problem as much as feasible in given circumstances. Messers Krugman, Simon may be unhappy (and there is indeed truth that Banks did ‘influence’ White House to get favorable treatment) and Merdith, Dr. Doom Roubini could still be waiting for their Armageddon; but for all practical purposes Obama Administration has put the banking cart on the rails. Until it may blow up again sometime next year if Economy fails to pick up; Banking issue will slowly recede. Numbers are in now and there is no uncertainty; at least for the Fed and practically for the Market too.
So now on all focus will be on the strength or weakness of the recovery and employment. (Employment has an added significance for this author now that he has lost his job at the Technology Company. One more engineer rendered unemployed in Valley. Struggle starts anew.)
In the same week, death spiral of American Newspaper becomes the mainstream news. Both Dowd and Rich in NYT wrote some appealing columns about the state of affairs. I will be soon joining masses in stopping the newspaper (on the grounds that unemployed cannot afford it). But what Frank Rich said is the ultimate truth – ‘opinions are for dime, but the hard news cost’. Indeed, opinions are cheap (including this blog!), but who would pay for journalist? No income, no paying jobs for journalists will not create the ‘true’ news. Andrew Sullivan talked some time back about ‘death of democracy when State undertakes torture’. But here is Rich’s variation – no hard news, no credible democracy. Already voices are heard saying that America will face the epidemic of ‘corruption’ at local and state level while the local newspaper industry is dying. Until we have some Internet based business model making sense at local level; such dire warning seems a realistic projection.
Oh boy, we are in for a great turmoil. In that sense, this week brought in lot of things in perspective and changed the game.