The term ‘Notlüge’ equates to a ‘white lie’ in English, but its literal translation is ’emergency lie’ — and there seem to be a lot of those nowadays.
Witness, for instance, this quote from Eugene Ludwig, CEO of Promontory Financial Group, an advisory service for (duh) financials, in the Wall Street Journal.
“I think serious efforts will be made to respect the confidential nature of the [US bank stress] test and its results,” he said, but added that “there is a real danger that the results of the stress test are uncovered and this roils the markets.”
We’re sure it would. CLSA analyst Mike Mayo effectively did his own stress test yesterday afternoon, forecasting loan losses to exceed the level of the Great Depression, and the market promptly ended its rally. Independent analyst Meredith Whitney has also found the banks wanting, unable to deal with rising unemployment.
Meanwhile, the Wall Street Journal reports that US government officials are meeting early this week to discuss how to ‘analyse the results’ of the stress tests being conducted on the country’s 19 biggest banks. We think this basically equates to a debate about how (or whether) to publicise the results of the tests. Whether to go for the potentially market-damaging truth or tell a Notlüge.
Of course, you could go a bit further, as others like former bank regulator William Black have, and say the stress tests themselves are one big Notlüge. They’re too weak to tell us anything of value, they’ve been designed “to fool us” — Black’s words.
Chalk those up with the changes to accounting standards of last week and obfuscation, or its German equivalent, is a running theme. Back to the WSJ:
At this week’s meetings on the stress tests, regulators also are expected to discuss how new changes to accounting rules might affect each bank’s performance in the tests. The Federal Accounting Standards Board [sic] voted last week to make it easier for banks in some cases to limit losses on assets they don’t intend to sell. Some government officials think this could significantly improve some banks’ condition on paper.
Officials prepare to analyse stress tests – WSJ
Bankers’ greatest fear – FT Alphaville
Failing the stress test; or, in the long run, we’re all dead – FT Alphaville
Stressing the stress tests – FT Alphaville
Stress tests debunked – FT Alphaville