I'd missed this the other day, but Tim Geithner apparently comforted the markets by assuring them that the “vast majority” of banks are well capitalized. But this, as Paul Krugman says, is meaningless. "There are 1,722 institutions on the Fed’s list of 'large commercial banks'....But the big guys are where the money is. The top 10 institutions on that list have 58 percent of the assets. (If we looked at bank holding companies rather than only commercial banks, assets would be even more concentrated.) So it’s perfectly possible that the 'vast majority' of US banks are well-capitalized, but that banks with, say, a third of the system’s assets are insolvent." In effect, it's like me saying a vast majority of your meal isn't poisonous. Not good enough. In fact, Geithner's wording actually unsettled Krugman. "Treasury knows the difference between raw numbers of banks and asset holdings, even if the press seemed to miss the distinction, and if he’d meant to say that the vast majority of assets are held by sound banks, he would have." Brad DeLong, meanwhile, gives us the sentence to watch for: "the vast majority of bank assets are in well-capitalized institutions." When we hear that, then we can relax a bit.
