Is the Stress-Test Good Economics or Just Good PR?

A critic of Treasury Secretary Geithner discusses the bank report card

Friday, May 08, 2009

The Federal Reserve yesterday released the long-awaited results of the “stress tests”. The report gave nine of the nation's largest banks a clean bill of health, and told ten others to raise $75 billion in new capital. The banks in trouble, including Bank of America, Wells Fargo, and Citigroup, will have until June 8 to come up with a plan to raise the money and have it approved. Joining The Takeaway is Simon Johnson, Professor at MIT, former chief economist at the IMF, and co-founder of the economics blog Baseline Scenario. He's been a critic of Treasury Secretary Timonthy Geithner's approach to solving the nation's financial woes, he joins us to discuss the results, the after-hours upsurge in trading, and what this means for the economy.
"The stress testing is only as good as the technical models and as good as the political will you have to oversee powerful banks."
—MIT Sloan Professor Simon Johnson on the results of the banks' stress tests

Stress-test results: click here to see which banks still need more cash.


Simon Johnson

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