In a post entitled "Oh Big Bank? Dr. Geithner Is Here To See You" Ambinder says Geithner’s plan is some kind of Jedi mind trick to enable bank nationalization.
To the extent that I understand what he’s saying, he believes that "TARP II will not be administrated in a frictionless universe," so stress tests which reveal major banks to be "unquestionably on the brink of insolvency" will make it "MUCH easier for the government to step in and seize them, politically and administratively" because the "administration CANNOT force broad nationalization down Congress’s throats."
1) The results of the stress tests will not be made public, so where would this "friction" come from, and how would we know about it?
2) TARP II only accounts for a $350 billion of the $2.5 trillion the Fed plans to spend bailing out the banks.
3) Geithner doesn’t plan to ask Congress for the other $2.15 trillion, he’s just asserting that the Fed has the right to spend it. So what exactly would he have to "force down Congress’s throat?"
Larry Summers is opposed to bank nationalization because he thinks it "Putinesque" and the economics team is largely staffed by people from the banking world who have no interest in standing up to the banking community. Stress testing is deliberately opaque and designed to inspire market confidence, not make the case to Congress for something Geithner is doing everything in his power to keep from doing.