The Wall Street Journal is not impressed with the Obama administration’s efforts to stabilize the economy thus far. In fact, they liken it to a bad “reality” show:
The current fear stems in particular from the uncertainty of the government’s intentions toward some of the largest banks that are thought to be too big to fail. The Treasury has promised what it calls “stress tests,” which are reasonable in theory and should have been going on for many months at regulated institutions. But the Obama Treasury has announced them as if they are a new cable TV reality show — Survivor: Manhattan.
Which institutions will be sent off the island this week? Will any of them end up like AIG, wasting away in federal hands? How many of the survivors will be forced to take “mandatory” preferred shares that could convert to common and dilute shareholders, as yesterday’s statement put it? And if they do, what new tortures will Barney Frank and Chris Dodd force them to endure? This is no way to restore financial confidence, much less begin an economic recovery.
The bank insolvency problem needs a disciplined approach, not a bailout of the day announcement. Yet that is what we are getting. As a result, the stock market is tanking, down to 1997 levels as of yesterday. The talk of nationalization of the banks neglects the fact that such a move will hurt little people, not rich plutocrats. Pension funds and 401k funds that hold bank stocks will get creamed by such a move.
Like all reality shows, “Survivor: Manhattan” sucks.