According to reports in the media, banks are set to pass the US government's stress tests on how well they would fare if the recession deepens. Whether or not the story is the result of a deliberate leak, somehow we suspected all along that the examiners would come up with a positive tale to tell. In current circumstances, saying something different would have too many negative consequences. Managing expectations and boosting optimism is part of the government's game plan.

The whole truth can be damaging, and isn't going to be told. Remember that the authorities have repeatedly refused to divulge important information to the media or even congressional committees, saying that it would jeopardise their rescue plans. So don't expect to be fully informed when the results of the stress tests are officially announced. There is bound to be a lot of aggregation of data and fudging involved.

We have witnessed a great deal of obfuscation by the government throughout the financial crisis, and accountability hasn't been at the forefront of their concerns. Last year, Hank Paulson, the former Treasury Secretary, went before Congress asking for enormous funds to rescue the banking system and offering little in the way of detailed plans. Naturally, there was an angry reaction among lawmakers, as well as the public.

Things have got a little better since then, but there is still a lack of transparency. Congress hasn't come out of this with flying colours, either. Political partisanship and posturing is rampant, even when critical national issues are involved, and the needle on the hypocrisy meter often jumps to maximum settings on the dial. And, of course, traditional pork barrelling has been very much in evidence in passing spending programmes.

Talking about obfuscation, the FASB ruling, relaxing the mark-to-market pricing of assets on bank balance sheets, goes a long way in allowing them to fudge their results. The pigs can now apply both lipstick and mascara and look a whole lot prettier than before.

The Obama administration is intent on preserving and up-righting the banks much as they are, with their managements largely intact. Toxic assets are going to be handled via the PPIP (Public-Private Investment Programme), which is intended to be a sort of semi-market solution to the problem of asset valuation and disposal. However, the net result is that the taxpayer will be subsidising the programme to a significant extent.

Ultimately, the bill for rescuing the banking system will be substantial and will be paid out of the public purse. There are no plans afoot to restructure the banks and sack their notoriously incompetent managers. These institutions were too big to be allowed to fail because of their importance in the payments system. Unfortunately, in the future they will still have that characteristic and constitute a potential danger to the system.

One way to address the issue would be to fire their current managers and break up the monolithic banks into smaller competitive units. Such entities could, more easily, be allowed to fail without threatening the economy and the financial system.

But Wall Street interests are powerful within the administration, and this solution was simply not on the table. Besides, Washington wants to back large American financial firms in the global competitiveness game against other rivals.

Timothy Geithner's appointment as Treasury Secretary was initially endorsed by the business community. Since then, many people have had second thoughts about his suitability. But, they shouldn't complain too loudly because, despite his gaucheness, he has tried to implement policies that are favourable to Wall Street.

In the view of many seasoned observers, Geithner should never have got the post of Treasury Secretary because of the many errors he had committed in his previous job. As head of the New York Fed, he was in a particularly favourable position to monitor developments in the financial system. Yet, he seems to have ignored the growing risk of systemic failure, and the dangers posed by the shadow banking system.

As a permanent member of the FOMC he consistently approved the excessive easing that took place during the Greenspan years, inflating a dangerous bubble. Geithner also bears the major responsibility for the decision to let Lehman fail. This caused enormous damage to confidence and was the principal cause of the freeze-up of the global financial system.

The government had already gone down the moral hazard road when it prevented the total collapse of Bear Stearns. And with AIG and other giants teetering on the brink, it made no sense to let Lehman fail, as a matter of consistency and because of the obvious damage it would cause.

Iraj Pouyandeh is a strategist and senior portfolio manager at LOM Asset Management. He manages the LOM Global Equity Fund. For more information on LOM Asset Management please visit www.lomam.com