Following Lawrence Summers' oddly inconclusive remarks yesterday to the Economic Club of Washington, the Treasury Department has asked banks to keep mum about the much-ballyhooed "stress tests" that they have undergone to determine their capital needs in difficult economic conditions. The apparent unwillingness of the federal government to disclose key information about the country's economic health has led some to assume the worst.
While yesterday's comments from Summers were generally up-tempo, they were almost painfully obtuse. In fact, he seemed to say little, beyond alluding to "encouraging signs" and stating that the feeling that the economy is in free-fall "will end within the next few months."
However, it's hard to get much more vague than a qualified statement about the end of an emotional response to the economy. Summers appeared unwilling to offer anything that bore the slightest resemblance to a solid prediction, much less a hard fact. When pressed about the level to which unemployment will rise, he stated that there were seven television cameras in the room, which were "seven too many" for him to offer a forecast.
Given Summers' famous skill for inserting his foot into his mouth, it is perhaps understandable that he is disinclined to indulge in specifics. However, the Treasury Department's secrecy about the results of its stress tests is also somewhat disturbing. It has asked banks to hold off on presenting information about the tests in their first-quarter earning reports, claiming that it intends to release the reports "in some form" by the end of April. However, given that many banks are publishing their reports on or around April 24, this delay suggests a disturbing level of squeamishness.
This secrecy is particularly disturbing when one considers that the Treasury Department hasn't even shared the stress test results with the banks themselves, leaving the institutions to rely on internally generated tests. This information is of particular interest to the financial markets, which will use it to determine which banks are the best bets for investment.
Granted, there are also reasonable, nonthreatening explanations for the government's firm grasp on the information. Perhaps Summers declined to comment on the upward limits of unemployment because he had no idea, or because he was afraid of being caught in an inaccurate prediction. Regarding the stress test info, maybe the White House simply wants more time to analyze the situation before it hazards an explanation. Certainly, the tone of the Obama administration (and the Obama campaign, for that matter) has been consistently reflective, cautious, and thoughtful, preferring a slow, well-reasoned response to a quick, inaccurate one.
Still, these justifications are thin. It's hard to imagine that the stress tests held any major surprises for the White House and, although Summers is not famous for his powers of prognostication, it's reasonable to expect that he would be able to offer a realistic prediction about how high America's unemployment will climb.
The worst part is that the White House's caution could end up having the opposite of its intended effect. After all, if this administration, which has placed so much emphasis on transparency, is unwilling to tell the whole story, it seems reasonable to conclude that the United States is chugging right into the middle of a doomsday scenario.
Given the country's current blend of pessimism and determination, the Obama administration might want to return to the classic strategy of marrying faith in the intelligence of the American populace with a reliance on hope as a tool for change.