At the moment, the Fed has asked the banksters not to leak the results of the bank examiners stress-tests during the fictiously inflated bankster earnings season (April 9-April20). You see, as long as the banksters can announce fictiously inflated earnings, the higher the stock market may go short term, and the better their capital ratios will be when the Fed finally announces the stress-test results at end of April, ahead of the implementation of Geithner’s program to cleanse the banksters of their toxic assets.
According to the NYTimes
“the banking industry, broadly speaking, seems to be in better shape than many people think, officials involved in the examinations say. That is the good news. The bad news is that many of the largest American lenders, despite all those bailouts, probably need to be bailed out again, either by private investors or, more likely, the federal government. After receiving many millions, and in some cases, many billions of taxpayer dollars, banks still need more capital, these officials say…
“Regulators say all 19 banks undergoing the exams will pass them. Indeed, they say this is a test that a bank simply will not fail: if the examiners determine that a bank needs “exceptional assistance,” the government, that is, taxpayers, will provide it…
“Regulators recognize that for the tests to be credible, not all of the banks can be winners. And it is becoming increasingly clear, industry insiders say, that the government will use its findings to press certain banks to sell troubled assets.”
“Clearly there is a desire to put a seal of good bookkeeping on these banks,” said Lou Crandall, the chief economist at Wrightson ICAP. “Whether they will use this to select a couple of sacrificial lambs is unclear.”
As far as the validity of these so called bank stress-tests goes, Yves Smith notes that”This is a garbage in, garbage out exercise. The banks used their own risk models to make the assessment, for instance, the very same risk models that caused this mess. And there was no examination of the underlying loan files.”
Understaffed bank examiners stress tests will have to rely on bankster models and the “significant judgements” of banksters. Remember from the Warren oversight Panel, the treasury believes this is a liquidity crisis, to be treated with more taxpayer-privided liquidity b/c assets are being mispriced in their significant judgment.
Bank examiners (from the treasury and Fed, suspect sources for examiners to come from, given what we know of their biases) will accept this garbage as “valid assumptions.” This alleviates them from the responsibility of being forward looking at all. It isn’t required when loans held to maturity are expected to pay out 100 cents on the dollar.
I am also alarmed that regulators say this is a test that a bank simply will not fail. Have they already determined the outcomes? I am further alarmed that the regulators recognize the need to GAME THE STRESS TESTS (sorry couldn’t resist thinking in all caps :-)] for the tests to be considered credible. Which they can easily do as you suggest by wiping out the some of the least offensive players.
It feels all so Yucky-Poo to me. Lurking Hu-Flung-PU seems to have a few more irons in the fire for branding?
I would also like to add that we can also anticipate the new “resolution authority” bill that Geithner is asking for to broaden US Treasury’s power and authority, will be used in conjunction with these stress tests.
And yes, it will be interesting indeed to see which bank managements get the ax, and which banks should be in receivership. If they round up all the unusual suspects and put them in front of the firing squad and leave the banksters intact, why you might just assume that the banksters delivered this injustice to the fairer banks. Oh, and guess what the banksters op margins will improve when there is less competition (just like WFC saw happen today according to their CFO).
