Through the stress tests the Treasury had sidestepped calls for nationalization and the “resolution” of Citigroup. Instead, in the interests of financial stability and minimizing the drain on the TARP fund, the Treasury and the Fed were in effect making it a government objective to restore bank revenue to healthy levels. The logic was inescapable. If financial stability, along with inflation control and employment, was now a key objective of economic policy, then bank profits were one of the key intermediate variables. More profit meant more strength on bank balance sheets and more stability.
