Banks vs.Geithner - This Can't Be Good

Even assuming that Wells Fargo & Co. Chairman Richard Kovacevich is wrong about his assessment of Geithner's plans for stress-testing banks, this bit from Bloomberg is not a good sign.

When the U.S. Treasury persuaded the nation’s nine biggest banks to accept capital investments in October, it signaled the whole industry was weak, Kovacevich, 65, said in a March 13 speech at Stanford University in California. Even though Wells Fargo didn’t want the money, it must comply with the same rules that the government placed on banks that did need it, he said.

“Is this America -- when you do what your government asks you to do and then retroactively you also have additional conditions?” Kovacevich said. “If we were not forced to take the TARP money, we would have been able to raise private capital at that time” and not needed to cut the dividend to preserve cash, he said ...

“We do stress tests all the time on all of our portfolios,” Kovacevich said. “We share those stress tests with our regulators. It is absolutely asinine that somebody would announce we’re going to do stress tests for banks and we’ll give you the answer in 12 weeks.”

The loss of trust and an increasingly adverserial relationship between banks and the government is not good for the country. I had not realized that the TARP money was forced on some of the banks. I can certainly see why Mr. Kovacevich is angry. He didn't need the money and the conditions to accepting it are changing all the time.

This just adds to the uncertainty in the market and goes along with my previous post on why I got out of TBT. The government is a capricious master and is capable of almost anything. That's not what anyone wants in an investment. When the government gets in, it's time to get out.