Via the great Avedon, this from Eugene Robinson:

End of the Magic Show
It's reaching the point where desperate measures -- brutal honesty and complete transparency -- may be the only way to bring the economy out of its kamikaze dive. If so, this won't be pretty.

What, you mean honest and transparency haven't happened already? Even though we've had a Democratic President[-elect] since November? I'm shocked.

What's missing from the whole system is trust, and trust can't be reestablished until we know how bad things really are. It's understandable that Treasury Secretary Timothy Geithner and the rest of Obama's economic team would be wary of full disclosure, but at this point I don't think they have much choice. If they don't give us a full, unbowdlerized report on what they find in their stress tests -- computer runs of how the banks would hold up under various economic scenarios -- suspicions will remain.

[Obama and his advisors] can't avoid revealing how bad things really are, though. They might as well go ahead and, to borrow from Walter Bagehot, "let in daylight upon magic," because the illusion is long gone.

Sounds great, right? And Robinson* is one of the saner Pravda columnists, so he may actually believe what he's saying. But he's asking to be lied to, and asking that we be lied to. Here's why:

First, the stress tests are bogus. We just don't have the personnel to do the stress tests, and that's assuming that the banksters aren 't also fraudsters, a wildly optimistic assumption after Enron:

it is pretty clear 100 people and a few weeks (or even a few months) is grossly inadequate for a bank the size and complexity of a Citigroup. Citi has operations in over 100 countries. All 100 examiners can do is make queries along narrow lines, and work with the data presented. This scale of operation won't allow for any verification or recasting of data. There isn't remotely enough manpower.

And do you think these examiners are in any position to assess the risks of CDS, CDOs, swaps, foreign exchange exposures, Treasury operations, prime brokerage, to name just a few? I cant imagine US bank examiners have much competence in FX risk (Citi trades in a lot of exotic currencies, too), and that's one of the easier to assess on the list above.

Now that isn't to say they couldn't develop this competence. In fact, Henry Kaufman (former chief economist of Salomon Brothers) has for some time argued that bank regulators around the world needed to form special groups with precisely these types of expertise to contend with the biggest, most sophisticated players. But they are not in place, and would easily take months to recruit and organize.

As a result, this is a garbage in, garbage out activity to placate the public and perhaps reassure investors.

Second, there's no way to show the computer models aren't bogus. The computer models that inflated the bubble were bogus, and the same people who wrote those models are going to be working at Treasury as subject matter experts in financial engineering. So why trust them?**

Third, the results are fixed anyhow (Yves uses the more graceful word "predetermined").

So, Robinson presents an operational definition of brutal honesty and complete transparency: "full disclosure," "unbowdlerized reports," and "computer runs." But that just means he's asking to be lied to: The stress tests and the computer models can't produce any such result. Garbage In, Garbage Out.

In the most optimistic scenario***, what happens is:

1. The administration kicks the can down the road with the fixed ("predetermined") result, by giving Big Money a few hundred more billions, because the extremely transparent and legitimate stress testing process proves that this can be the very last theft bailout rescue. Maybe a weak bank is put down pour encourager les autres.

2. The adminstration releases the data, the computer models, and the results of the modeling runs.

3. Our famously free press teabags every administration official in sight, and many that aren't. Then they write a great number of stories full of mis- and disinformation based on data they willfully distort (Exhibit A: Social Security) and models they can't begin to evaluate, not having the expertise to do much more than make phone calls to anonymous sources who routinely lie to them.

4. The creative class does the same, except on the cheap, as part of whatever game of 11-dimensional circular chess they imagine themselves playing.

5. Can kicked down the road, the Village sleeps the sleep of the righteous!

Six months later, those who can actually look at the data, critique the models, and run alternative scenarios on new models, have done so. The verdict: The entire process was bogus from input through model to output. It's just like Iraq! The hippies are right again! Quelle surprise.

Meanwhile, the market is still tanked, and Big Money is still on strike, because they're not completely stupid, and they know the whole process is bogus. Creating trust with a bogus process is way too meta for the times.

Big Money has, however, collected a few more hundred billions! This time from Democrats! So what's not to like?

Keep all this in mind when you're listening to the SOTU tonight.

NOTE * Robinson's black, mkay? So his editorial, even though it says the administration has been neither honest nor transparent in its dealings, on our behalf, with Big Money, can't be racist. OK, OFB? Deal?

NOTE ** Sure, "set a thief," just like Joe Kennedy at SEC in FDR's time. Any evidence that's so this time round?

NOTE *** So far, the administration's commitment to transparency has been honored more in the breach than the observance. White House emails, anyone?