IMF and Geithner Disagree on Economic Forecast

The contrast in two reports as to the state of the US and world economic condition issued by the IMF and as set forth by US Secretary of the Treasury Tim (No Problems) Geithner in congressional testimony could not be more striking. It is amazing that the forecasts are being issued on the same subject on the same day.

Here is the IMF take on the financial crisis:
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Worldwide losses tied to distressed loans and securitized assets may reach $4.1 trillion by the end of 2010 as the recession and credit crisis exact a higher toll on financial institutions, the International Monetary Fund said.

Banks will shoulder about 61 percent of the writedowns, with insurers, pension funds and other nonbanks assuming the rest, the Washington-based lender said in a report released today on the state of the global financial system. The fund forecast $2.7 trillion in losses from U.S.-originated loans and assets, compared to its estimates of $2.2 trillion in January and $1.4 trillion in October.

“Stabilizing the financial system remains a key priority and, although progress is being made, further policy efforts will be required,” the fund said in its report. “Without a thorough cleansing of banks’ balance sheets of impaired assets, accompanied by restructuring and, where needed, recapitalization, risks remain that banks’ problems will continue to exert downward pressure on economic activity.”
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Now look at what the starry eyed optimistic blowing smoke up the committee’s ass Tim Geithner has to say as reported on Bloomberg:
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Treasury Secretary Timothy Geithner told a congressional panel that the “vast majority” of U.S. banks have more capital than needed.

He also said there are signs of thawing in credit markets and some indication that confidence is beginning to return.

“Indicators on interbank lending, corporate issuance and credit spreads generally suggest improvements in confidence in the stability of the system and some thawing in credit markets,” Geithner said in prepared testimony to the committee overseeing the Troubled Asset Relief Program.

Earlier today, Geithner said the program has enough money for bank rescues even under “conservative” estimates.
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Clearly there is a vast disagreement here as to what lays ahead. IMHO the Obama administration is making a huge mistake in trying to paper over the insolvent position of many of the largest US banks. When the truth comes out, as it eventually will, the fallout for Obama will be devastating. The Treasury Secretary has very little creditability, if any, left to lose, and is becoming a huge liability to President Obama and to the nation.

Have you purchased your pitchfork yet?