First of all, let me say that Federal law prohibits the disclosure of all bank "stress tests" and bank examinations, so everything said here is pure hearsay.
Nevertheless, we have some good news: Banks are holding up well under Federal examination. All 19 banks will pass their stress tests. The bad news is that they still may need additional taxpayer money.
The word from the grapevine is that the stress tests are still the subject of fierce debate within the banking industry. According to the rules, banks apparently cannot "fail," but they may be deemed in need of "exceptional assistance," forcing them to accept more taxpayer money and more government control. Some banks may face restrictions such as limits on employee compensation or be ordered to change their boards or management. In extreme cases, the government may step in and take an ownership stake.
As for what's on the stress tests, they reportedly include a "what if" scenario, such as what if home prices drop another 22% this year and unemployment rises to 10.3% and the economy contracts by 3.3% this year and stays flat in 2010. What is a bit spooky about these numbers is that they are so precise, like 22% or 10.3% or 3.3%. Does the government know something we don't? Banks are also being asked to project their earnings for the next two years.
Banks that fall short will have six months to raise capital or the Treasury Department will resort to using taxpayer money
But here's the kicker: Rumor has it that Treasury Geithner held a breakfast meeting with bankers and told them that they had to "bite the bullet" and take more write-downs, which means that banks will have to sell assets at prices that investors are willing to pay.
Do you believe that these "stress tests" will work?
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Reader Comments (Page 1 of 1)
4-12-2009 @ 12:47AM
Joe Moe said...
Bwwahahahaahh...
They are also, at least one of them, wildly profitable, apparently, as reported yesterday.
Kindly and promptly return our handout money, bunch of bloodsucking crooks!
4-10-2009 @ 12:48PM
James Roy said...
What ever happened to 'the tanned one' who ran Countrywide ?? This boy knew how to skim and suck in customers who could not pray loud enough to pay back their loans. Surely Anthony could keep an eye on things.
4-10-2009 @ 12:50PM
Matt said...
These banks are incredible and so is the Obama administration. At this point I see no reason to continue to inject more money into them. This is a free market. Those that cannot survive, should not survive. Besides, the job market is still predicted to exceed a 10% unemployment rate or worse. I believe these stimulus plans have helped to salvage some of the losses, both financially and in the job market, but at what cost? I think we need to start thinking about using tax cuts on capital gains and corporations to create a better flow of cash in the economy.
4-10-2009 @ 10:15PM
Johnannamo said...
Whatchew mean "19 banks"?? WHICH 19?
Jeez Louise they're going to get away with this? Our "leaders" vote themselves the treasury and we take the hit by losing the jobs that already had less benefits than Europe or Japan? The 5 million financial sector insider reporters and gold sellers and TV show boneheads and "financial advisors" and so on just keep getting paid? They whine about giving the crooked car companies $25 billion when they gave themselves 100 TIMES that???
4-10-2009 @ 12:55PM
Art@theleveller.org said...
"Stress tests" are a sham. Under FRB direction starting after Sox, banks were required to develop special risk models and stess tests to evaluate scenarios under which their investments and operations would suffer and put the institution at risk. Most banks scrambled to understand how to go about it. They wasted money and time and independent auditors to come in and assist with these models.
This was before the current bust and these banks avoided nothing with their useless models.
I laugh when I hear the current dialogue about "stress testing". This is merely window dressing so that the Fed appears to understand and have control over present circumstances.
Total fraud!
4-10-2009 @ 1:38PM
clikdawg said...
" ... banks will have to sell assets at prices that investors are willing to pay .. "
Right. So if a few of Tim's pals want to buy something a bank owns, Tim gets to set the price. If the bank won't play along, well ... ve haff vays uf dealing mit dis, ya?
Nope. No potential for abuse here. None at all ...
4-10-2009 @ 1:53PM
Denis Goddard said...
The futility of trying to reign in Washinton, DC is one of the many reasons I joined the Second American revolution.
http://freestateproject.org
4-11-2009 @ 2:58PM
papergains said...
If the European banks passed their stress tests, what makes anyone believe the big US banks won't pass.
Not to mention they're doing it themselves which raises questions. This should have been carried out like an audit.
http://seekingsigma.blogspot.com/
http://papergains.blogspot.com/
papergains
4-12-2009 @ 6:36PM
Pravin said...
2 banks failed on Good Friday, "Cape Fear Bank, Wilmington, NC " and "New Frontier Bank, Greeley, CO".
This makes 23 bank fails this year and 48 from start of year 2008.
Cape Fear Bank was the first bank from North Carolina to fail while New Frontier Bank becomes the second bank to fail from Colorado this year.
Nobody know how many more banks are going to fail. Prediction is in hundreds of bank.
I found list of failed banks and the map of where the banks are failing on portalseven.com
The page locations are :
Map of failed banks : http://portalseven.com/finance/Failed_Banks_Map_Since_2008.jsp
List of banks failed in 2009 : http://portalseven.com/Failed-Banks-2009
Do check it.
Pravin