Kevin Drum Smackdown Watch

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The IMF says U.S. banks need $275 billion in new capital.  Tim Geithner says they need $75 billion.  Or, to be more accurate, that’s what I said the IMF and Tim Geithner said.  James Surowiecki says I got it wrong:

The confusion here is understandable, but this is a mistake….The Fed’s estimate, as seen in the stress-test results, was that, as of the end of 2008, the nineteen biggest U.S. banks required $185 billion in new equity. That number is now $75 billion because, over the last four months, via things like restructuring, asset sales, and Citigroup’s conversion of preferred stock to equity, the banks have raised around $110 billion in equity. But the apples-to-apples comparison is that the I.M.F. estimate was $275 billion, the Fed’s $185 billion.

The I.M.F.’s estimate, though, is for the banking system as a whole, while the Fed’s is just for the nineteen biggest banks. Those banks have about two-thirds of the banking system’s assets, so if capital needs are distributed proportionally, then the Fed’s estimate suggests that the banking system needs just about, yes, $275 billion — a number that’s identical to the I.M.F. estimate.

Can we please fix the economy so I can go back to writing about simple stuff like rescuing the healthcare system and keeping the planet from turning into a cinder?  Thanks.

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DEMOCRACY DOES NOT EXIST...

without free and fair elections, a vigorous free press, and engaged citizens to reclaim power from those who abuse it.

In this election year unlike any other—against a backdrop of a pandemic, an economic crisis, racial reckoning, and so much daily crazy—Mother Jones' journalism is driven by one simple question: Will America move closer to, or further from, justice and equity in the years to come?

If you're able to, please join us in this mission with a donation today. Our reporting right now is focused on voting rights and election security, corruption, disinformation, racial and gender equity, and the climate crisis. We can’t do it without the support of readers like you, and we need to give it everything we've got between now and November. Thank you.

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