Have a clue! If he is advising folks on risk factors, he is a danger to his clients!

No one said that most of the $8T in assets in the banking system are bad. The problem is that the concentration of loss is in the major financials which are holding the rest of the system, the government, and the country hostage to their busted dreams. Your rhetorical attempt to stuff the desperate losses of the Big Few under the skirts of the weary solvent many does you no credit.

Your reference to mortgage backed securities and their supposed absence from the system as a cause for relief is misconceived. This is well known, yes: most of that paper was on-sold. —And then the Big Lost Few turned around and wrote CDS swaps against those securities for face or against the bonds of those securities purchasers for face, so guess where the ‘loss’ on those securities will progressively boomerang back to? Now the bulk of those losses haven’t been realized yet because the tranching structures of those MBSs were designed to absorb the first losses internally and on the small players. Which is exactly why the Big Few are putting us through this whole dismal charade of ’solvent today, my friends’ to raise capital _before those swap losses_ are put to them. Think that THOSE exposures were adequately accounted for in these ‘tests,’ my friend? If so, I’m sure that Citi has a slice of preferred they’d love to sell you cheap. Or even dear (I mean why not, the public gets the bill?).

Then there is the matter of securitized LBO debt you haven’t managed to drag into the discussion, quite a lot of which is left on the sometime ’speculation’ banks (which is what they should be called). Think that those are marked to market, especially when the minders of accounting standards were dragooned into ‘mark and let mark’ practices?

In view of these small further matters, without even going into other relevant Concerns, that $6B at Wells, yes that $75 headline ARE COMPLETELY MEANINGLESS NUMBERS. They are numbers for the media and the rubes, but not meaningful estimates of probable losses. If you added a zero on the right end to that Wells raise we might be talking the real money. If it was indeed large private capital standing on the sidelines about to buy in to the six at Wells, I would tell its deployers, Please don’t: start your own clean major bank with it, and make a killing. Although given all the money floating around from the public put to the Big Few which they aren’t investing in the real economy, I suspect that we will have considerable shadow purchases funneld through the hedges to prop up each others equity, here. No smart money is going to buy into Wells, but others in the same boat have every incentive to take public money and quitely support each others’ capital to make the whole show go on.

The problem we have here, my friend, is that the entire core of the financial system has become an aggregated slime mold of formerly distinct Enrons, bloated 100 times larger.

And your assurance that large private capital would ne-eev-eerrrr invest in the banking system again if they were nationalized is . . . music to my ears, that sounds about right. We need a banking system which serves the country, not a greed parade that hollows it out. Most of those folks: they’re working with Other Peoples Money anyway, not their own. That money will flow to real return, and real returns will return to the banking system to attract them when said banking system is sound. Which it is not and will not be so long as sham shows like this ‘fooled yah’ examination are promoted by a government which still, as of today, refuses to regulate the financial industry in any meaningful fashion. And that outcome, my friend, sucks dynamite.

10 reasons the stress test doesn’t suck.

Yves has a point of view which I respect, but don’t entirely agree with. The major reason is her emphasis on investment banking. That is only part of the credit system — although I agree that the majority of excesses seem to be associated with them.

One example that is documented in the report is that out of $8 trillion in assets, there is less than $200 billion in non agency mortgage backed securities — and most of those aren’t of recent vintage or subprime, alt a, etc.

Wells is raising $6 billion tomorrow morning — 8% of the $75. By the end of the month I expect that about half will be raised – maybe $10 from BAC asset sales. Some of the rest might have to come from converting the TARP preferred.

This capital raise plus the Goldman and MS raises are the main reason that nationalization isn’t a great idea — capital flows to places where it is treated well. When you start wiping out investors, you won’t see any additional funds from them. Plus the fact that wiping out the common and big chunks of debt includes wiping out taxpayer owned preferred and likely taking down life insurers and pension funds.

And regardless, when the reality that less than half the losses in the whole bust-out have tomatoed the players really comes home in the next few months, what lie will they come up with then? Tune in and find out for the next episode of ‘Krypton’s a Gas If You Don’t Mind a Dying Sun.’

Not a rosy picture, no mater how much lipstick you put on it.