Will Eric Holder prosecute Tim Geithner if he covers up “Stress Test” Results?

After initially being very critical of Eric Holder (Obama’s Attorney General), I praised Mr. Holder for setting aside the ill-gotten verdict against former Senator Ted Stevens.

While I realize that public declarations of this would be premature, I hope Eric Holder would criminally prosecute Treasury Secretary Tim Geithner if Geithner attempts to squash the reporting the results of the Treasury’s “stress tests”

One more point worth making – Results of the stress tests, especially if they show potential capital shortage, surely constitute a reportable material event and therefore must be publicly disclosed to the SEC to protect the shareholders, who are likely to be diluted.

It is not just the matter of public trust and fairness, it is the SEC law.

More from Calculated Risk:

And on transparency:

“I think serious efforts will be made to respect the confidential nature of the test and its results,” [Ludwig] said, but added that “there is a real danger that the results of the stress test are uncovered and this roils the markets.”

The results of the stress test should be made public – at least for any bank taking TARP money. This would build confidence in the process, otherwise serious doubts will remain.

The “stress tests” are part of the Treasury’s efforts to launder money from the US government to bankers and Wall Street speculators. However, as the “stress tests” themselves will be conducted by career civil servants, the raw analysis (if not the Treasury’s final spin) may well be objective.

I expect Treasury Secretary Tim Geithner to attempt to lean on banks to prohibit them from fulfilling their lawful duties of publicly reporting the details of these material events. I hope Attoreny General Eric Holder will make that right.

Update: The Federal Reserve prohibits banks from publishing their stress-test results. Will Eric Holder prosecute Ben Bernanke?

4 thoughts on “Will Eric Holder prosecute Tim Geithner if he covers up “Stress Test” Results?”

  1. I think your point about requiring a report via SEC is the whole thing. Geithner doesn’t really have to publish the stress test results, because the results will be self-reported. If Geithner intereferes with that requirement, it would be criminal.

    It’s really a nasty little prospect… imagine you’re a former Master of the Universe. Some squeaky bureaucrat tells you have failed the stress test and either you tell the family that you’re terminal, or you die.

    There was a recent note out saying that a series of major bank nationalizations are expected by July of this year. Sort of a July 4th celebration! I don’t think they’ll have the pre-packaged process in place by then, but I do think it will be in place by EOY. At which point you can kiss Citi and BoA and Wells goodbye.

    THis is going to be an interesting 90 days.

  2. There was a recent note out saying that a series of major bank nationalizations are expected by July of this year. Sort of a July 4th celebration! I don’t think they’ll have the pre-packaged process in place by then, but I do think it will be in place by EOY. At which point you can kiss Citi and BoA and Wells goodbye.

    Fascinating! Are you able to share the source of this?

    Certainly it would be good news, but half a year too late…

  3. well of course now that you ask me i looked for it and it looks more like i was referring to chatter on my bloomberg. but someone recently published a note saying something like that… maybe with the implication that nationalizations would come this year. i can’t remember who said that first, probably roubini. he seems to be the first one saying the only reason obama hasn’t moved harder is because of lack of political will.

    i think there’s more to it than that, but i suppose that is a big part of the problem.

    we also need to get health care fixed, that will help out profits immensely. so maybe that’s the political will thing in just another form.

    as for half a year too late… i don’t really think so. i don’t think a nationalization of one of the big banks in January would have done much more than completely code the economy. we weren’t ready for such an undertaking… we still aren’t, but we’re getting there.

  4. I hope you’re right about nationalization.

    I agree with you on health care.

    Timing is a technical decision, in the same way that the timing of the beginning of the Surge in Iraq is a technical decision. It’s a question of the benefits of wishful thinking (sometimes problems really just do go away if you ignore them long enough) and logistics (having what you need in order).

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