Quelle Surprise! Bank Stress Tests Producing Expected Results!

Should this even qualify as news? From the New York Times:

For the last eight weeks, nearly 200 federal examiners have labored inside some of the nation’s biggest banks to determine how those institutions would hold up if the recession deepened.

What they are discovering may come as a relief to both the financial industry and the public: 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.

The whole point of this charade exercise was to show the big banks weren’t terminal but still needed dough, and I am sure it will prove to be lots of dough before we are done. But they now have the Good Housekeeping seal, so the chump taxpayer can breathe easy that the authorities are taking prudent measures to make sure his money is being shepherded wisely.

If you believe that, I have a bridge I’d like to sell you.

We said from the beginning the stress tests were a complete sham. Just look at the numbers. 200 examiners for 19 banks? When Citi nearly went under in the early 1990s, it took 160 examiners to go over its US commercial real estate portfolio (and even then then the bodies were deployed against dodgy deals in Texas and the Southwest). 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.

The Times story does slip in some shreds of doubt, but a casual reader is likely to read past them. Consider these statements:

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. The hope is that by cleansing their balance sheets, banks will be able to lure private capital, stabilizing the entire industry.

Yves here. So did you get that? They all will be declared to pass in some form, no matter how dreadful they really are (if the remedy is putting in more Federal dollars, rather than a receivership, then the fiction that the money is not being wasted must be preserved). But so as to look sufficiently tough, some banks will be treated harshly. If it winds up being, say, Fifth Third (which I am told by John Hempton is a very well run bank, publishes much more honest financials than its peers, but is in simply terrible geographies, Michigan, Ohio. Florida) and not Citi, then we know the process is not just hopelessly politicized, but shamelessly so. Back to the article:

The state of the industry will come into sharper focus next week, when big banks like Citigroup and JPMorgan Chase start reporting first-quarter results. Many analysts predict the reports will show banks are on the mend, with help from low interest rates, fat lending margins, dwindling competition and profits from trading in the financial markets in January and February. In the last six weeks, financial shares have soared on hopes that the worst for the industry is over.

But some analysts say investors’ hopes are misplaced. With the recession, banks are likely to record further large losses on credit cards, corporate loans and real estate.

“Nothing has changed with the fundamentals,” said Meredith A. Whitney, a prominent banking analyst who has been bearish on most financial institutions.

Yves here, Note the failure to point out that Whitney has been the most accurate in calling bank performance during this downturn. No, she is instead a mere bear. And the article also fails to mention that Leon Black, a distressed investor who has long been active in the real estate industry, is forecasting $2 trillion in real estate losses. I doubt the stress tests have that factored in. Consider the worst case scenario:

The tests, led by the Federal Reserve, rely on a series of computer-generated “what-if” projections in the event the economy deteriorates. Those include unemployment rising to 10.3 percent by next year, home prices falling an additional 22 percent this year, and the economy contracting by 3.3 percent this year and staying flat in 2010.

Based on the work of Carmen Reinhart and Kenneth Rogoff on financial crises, the expected trajectory for this crisis is for unemployment to peak in the 11-12% range, a fall in GDP of 5%, with it taking three years after the bottom for growth to return to normal levels, and housing takes over five years to bottom. And that is the typical trajectory for crisis countries, none of whom faced a backdrop of a global contraction. Whitney is calling for real estate prices to fall another 30%. So the worst case falls short of even likely outcomes, let alone a real disaster.

And the theater continues:

At a recent breakfast with a dozen or so corporate and banking executives in New York, Treasury Secretary Timothy F. Geithner warned he would take a tough stance. Many banks, he suggested, believe the investments and loans on their books are worth far more than they really are, according to a person who attended the meeting.

Mr. Geithner said that was unacceptable. The banks, he said, will have to sell these assets at prices investors are willing to pay, and so must be prepared to take further write-downs.

How does one parse tripe like this? First, the public private partnership program, aka cash for trash, is voluntary. Banks are not being compelled to sell. The idea that the banks “have to sell” is a canard. Second, the gaming of the program has already started (notice no lecture from Geithner about that?), so there is pretty much no risk that anyone will take a loss on the values they have in their books. The best summation of how bad this will get is from Rortybomb, who expects all the old Enron tricks to be employed (notice the terms of the PPIP prohibit the fund managers from gaming the process, not the banks trading among themselves. You can drive a truck through this oversight. And the Treasury has remained silent as the banks themselves have been loading up their balance sheets with toxic sludge, paying more than private investors are willing to bid).

I’m sure all the bankers understand full well the massive disconnect between talk and action, and are dutifully following Treasury’s lead in maintaining appearances.

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  1. Anonymous

    No surprize here, the NYT operating as a house organ. They, the Washington Post, and the networks are system-servers – indeed, they, themselves, are part of the system – and offer all the “journalism” of PBS’s Washington Week with Gwen Eyefull. Perhaps most emblematic of this kind of vomit is the inimitable Thomas Freidman. Below a link to the kind of response he and it deserve:


    There’s really nothing like seeing Freidman take a pie in the face, is there?

  2. mmckinl

    Disaster Capitalism Kabuki …

    The Geithner – Summers looting of the Treasury continues unabated. As the economy collapses the Spin Doctors pronounce “all is well”.

    The limits of credulity long since abandoned only blatant lies and incredulous hyperbole even raise an eyebrow anymore …


    Thanks for your post Yves

  3. eh

    Best government Wall St money can buy.

    Good thing banks are already…well, banks. They don’t have to go to the trouble of transforming themselves into bank holding companies — that should yield some savings.

  4. doc holiday

    Isn’t news supposed to address change?

    I assume these regulators have improved neo haircuts, manicures, pedicures, facials, massaged assets and new Christmas Bonus accounts, and I also assume they sat around on taxpayer time doing nothing and reporting nothing, accounting for nothing and being unaccountable for putting on a farce. I assume they were helping shred documents and helping hide the truth in an effort to help the current administration spin the recovery story, along with FASB, et al. These brilliant soldiers from SIFMA are a credit to accounting firms like Arthur Anderson that stand for corruption, distortion and false and misleading information. May they rot in prison and eat CDO’s for breakfast, lunch and dinner.

    PS, I still like this:

    Thomas Geoghegan on “Infinite Debt: How Unlimited Interest Rates Destroyed the Economy”

  5. Glen

    …but the market loves it; Dow futures up 79 points. All is good again in Fairyland – the news is always just wonderful. The market is always right you know.

  6. esb

    It will be difficult to declare the crisis over and then continue to go back to Barney Frank for more and more money.

    I am somewhat at a loss in determining what is actually going on in Geithner’s mind.

    I had thought he was penciling in 25% cumulative inflation in the 2011-2013 period.

    But it seems he will need it in 2010-2012 to make this nonsense fly.

    Again, I cannot discern any real rationality behind his moves.

  7. Expat

    Argh! How can you expect us to follow the new “niceness” rules for comments when you post a story like this one. All I want to do is use epithets, insult everyone, and advocate armed revolution when I read a piece like this one.

    Didn’t the Carter administration develop neutron bombs for just this kind of situation? One on Wall Street, one on Washington, and one on Stamford. Problem solved.

  8. tegnost

    Anyone know what happened to the phrase “starve the beast”? Seems to me that game plan is still operational as “they” privatize all “they” can get their grubby paws on.Taking the food out of the bowl as quietly as possible, no doubt hoping that the beast(is that us?) stays asleep…
    As a longtime student of nakedcap college I must come off the sidelines long enough to send props to the distinguished doc”whats my mood today”holiday, Richard Kline, Richard Smith, ndk,independent accountant, mmckinl,and many others, and especially to yves and the guest bloggers…the posts and informative comments are what the the majority of us are here for, this is the true american journalism… I really want to know what you are thinking so PLEASE keep putting it out there ’cause most of us are not the haters, we’re the students…
    roger and out

  9. Anonymous

    Brought to you tonight by the Writers of Goldilocks and the 3 bears

    If the banks were found to be too cold, they wouldn’t need the cash , too hot they would be nationalized, but the regulators mysteriously found JUST the right temperature…and they all lived happily ever after

  10. Richard Kline

    I have found the stress test concept not simply a sham but a sinister capitulation by the government to the bankers. The real function of these tests, to me, is not in any way to find out or even to shape perceptions of the _banks_, it is to give the traitors running government financial policy political cover to shovel more money faster to the corrupt financial institutions which are chewing the face off our republic of laws. The tests show that what the government is doing to this point ‘is working,’ i.e. the banks are ‘getting by.’ What is needed by that image is, more of the same only moreso. Far from testing the banks, this exercise in perverse performance art is designed to sell the Stealout to the media and Congress.

    I use the word ‘traitors’ advisedly. To this point, one could argue that folks like Geithner and Summers were ‘ill-conceived’ in their actions. ‘Too friendly’ to those who their policies are enriching with public money. Even ‘corrupt’ in their tireless efforts to reward their friends and peers in the financial industry from their present positions of power in government. But these tests cross an important line: they betray the public directly through an intent to mislead. We go beyond failed ideas and corruptions with this into violation of oaths of office and direct attempts to suborn the authority of the state for private gain.

    Call a spade a spade: we are robbed and betrayed. While President Lackey smiles, and waves, and hands out iPods like that is the function of his office and authority. When I spoke of a soft coup by a fascistic oligarchy in the Fall, for me that wasn’t rhetoric. We see now that we have no government capbable of action and willing to act for the public in the instance of these fraudulent ‘tests.’ The function of government has become to deceive the governed. It matters not even if those at the top of the government who have signed off on this believe that it is in the best interests of the country: they lie, and that is proof enough of the quality of their judgment.

    . . . Well, they aren’t shooting us. Yet. Don’t think that that can’t happen here. When looting us isn’t enough for them, then we’ll see what further lines they cross as well.

  11. Anonymous

    Again: What has the US citizenry done to stop what is going on?

    You must have read or heard it:
    people get the government they deserve.

  12. just another social scientist

    Anyone want to hazard a guess at the likelihood that debtors’ prisons will come back in concept if not reality? Or have we reached the point where our cost of living requires the use of credit and we’re already indentured servants of the financial industry?

    Either way, the system is not viable. It was viable so long as the “haves” didn’t get too greedy making money off of the “have nots”, but we long passed the threshold of sustainable rent-seeking behavior.

    Then again what do I know about finance, I don’t have a PhD in Economics or a 99th percentile net worth.

  13. B. Mull

    Actually officials said the stress test results are EVEN BETTER than expected!

    Wow. That’s good enough for me. Recession over. Now I’m going to ride the tide by putting all my last $40K in bailout mutual funds.

  14. alex black

    To Richard Kline:

    Don’t worry, they won’t shoot us. They need someone to work and pay off the enormous debt they’re creating as they loot. So we’re in no danger – as long as we keep working, pay our increasing taxes, remain docile, keep our mouths shut…. We’re their cash cows – literally. We’ll be well cared for – maybe they’ll even add steroids to our feed to increase our output!

    As far as the Ipod, I thought that was exactly why we elected Obama – because he’s cool. Utterly inexperienced with no record of accomplishment, but has a nice smile. One can’t buy a dog and then complain that he can’t fly. He’s our lovable golden retriever, out making friends. It was a nice gesture, giving the Queen an Ipod – he even loaded it with his favorite hiphop tunes. Right now the Queen is wandering around listening to it, with a puzzled expression on her face as Jay-Z is singing “I got 99 problems and not one of them’s a bitch…”

  15. fresno dan

    sputter….more sputtering…#$%!!!*
    to paraphrase, “Your in fine health…dare I say, never better. Except your heart doesn’t beat, and you have no brainwaves…i.e.,dead…and purtrifying…and you stink.”

    Ha, Ha, Ha. I just realized that the governmental policy is…comedy!!! Thats the only rational explanation. Man, was I obtuse!!! Whew, now I feel better.

  16. Anonymous

    @Richard K & alex black,

    Does it feel like a Bill Cosby Jello commercial to you too, hay Kids, Jello makes me feel good too. All better now eh.

    Oh, but they will shoot if there is a showdown in the streets, couple at first, to send the message, After that open season if problem persists, Americans would be amazed at the lengths power would apply if really threatened.

    skippy…have a nice day

  17. ruetheday

    Read between the lines:

    “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”

    In other words, Citi, BoA, JPM, and Wells are toast but most of the small to midsize banks are doing ok, so “broadly speaking” there’s no reason to worry since we’ll just continue the status quo of bailing out the big 4.

  18. Anonymous

    Meredith is being called more than a ‘mere bear’ by David Weidner in the WSJ. She is now a ‘myth’! a ‘one hit wonder’. Guess being too candid about the banks can make some folks jealous.

    Thing is the interview I saw with Meredith Tuesday on CNBC wasn’t all
    negative. She admitted the Fed and Treasury have been shovelling enough money through the back door to some banks to make their first quarter results more presentable. That not every bank was a disaster just that some are or soon will be.

  19. Anonymous

    Obama strikes me more and more like Clinton. Such a smooth talker you can’t help but be swayed while listening. I had so much hope for him. Unfortunately it now seems obvious that he is a either a co-conspirator, a dupe, or a prisoner of Wall Street.

    I’m running out of all hope fast. We made by far the best choice in the election, but it turns out not to have mattered. Is change even possible, or is it checkmate already?

    Seriously, what is even possible? Will a democrat who doesn’t serve wall street challenge Obama in the primary? I doubt it. That means we will be looking at a republican president in either 4 or 8 years. Obviously that won’t help. So what hope can even be imagined?

  20. Sandi Rubinspan

    “Many analysts predict the reports will show banks are on the mend, with help from low interest rates, fat lending margins, dwindling competition and profits from trading in the financial markets in January and February.”

    A poignant summary of all that’s wrong with TARP. Gov sponsored negative interest rates destroy savings. Fat lending margins made possible by dwindling competition (econ 101).

    “Trading” in the financial markets by the order takers and market makers is the worst of all. The markets are dominated by private insider trading cartels. IMO, the equities and commodity bubbles are de facto examples of unfettered, unregulated, coordinated, and illegal “trading” by monolithic banks and their hedge fund partners. How could stock market values reached such a height, in an assymetric and transparent market, only to nose dive over 50 % in a matter of months and still be considered “overpriced” ? You decide.

    Why would we the people want to preserve such an abomination. I don’t think “we” do.

  21. Anonymous

    Great post!

    Richard Kline good comments all. The intentional nature of it all now leaps center stage.

    Regarding this …

    “. . . Well, they aren’t shooting us. Yet. Don’t think that that can’t happen here. When looting us isn’t enough for them, then we’ll see what further lines they cross as well.”

    The goal is to have us shoot each other. We will buy our own bullets. The parasite is shifting globally from a large and competitive middle class as overseer host, to a smaller, more efficient, less competitive law enforcement as overseer host.

    Deception is the strongest political force on the planet.

    i on the ball patriot

  22. run75441

    Richard Kline:

    You stop way short of your endictment of the banking industry and those transfusing money to it via AIG. Instead of having “casting a shadow of regulatory uncertainty over an otherwise thriving market” Larry Summers as US Treasurer, we get his trainee Timmie Geithner. Both have whom have trained under the maestro standing in “shocked disbelief” Greenspin. Is it ay wonder that banks are being declared well enough to be checked out of the treasury hospital with an appointment for another transfusion latter? They are not going to admit to anything bad.

    Meanwhile, we have those evil automakers who have been slipping those legacy autos on to the public, who can’t decide which fuel efficient model to buy enlight of $3-4/gallon gas. Deception is all on how you color it or disguise it and whether the multitudes buy into it. Of the populace how many do you believe understands derivative, CDO, MBS, tranching, and CDS? 1%? If that much? How many understand the implication of higher gasoline and those evil unionized autoworkers? 60+%?

    Its all on how you color it. The experts, say banks are ok and will survive. The experts say, automotive is sick and should die. Meanwhile the perpetrators walk, companies dies, people loose jobs, and we all suffer.

  23. Anonymous

    How are we to have any confidence in these stress tests if they are performed by the bank on them selves. From the FAQs – Supervisory Capital Assessment Program we
    have the following.

    1 Each participating financial institution has been instructed to analyze potential firm‐wide losses.
    2 As part of the supervisory process, the supervisors will meet with senior management at each financial institution.
    3 Supervisors will carefully evaluate the forecasts submitted by each financial institution.

    If you look at the graphs then the worst case scenario is back to normal in early 2010. Go read the congressional oversight panels view of the stress tests and why they feel its relevance is limited. Why does it fall woefully short of the stress tests performed in other countries. Since decision makers believe the problem is with misguided negative sentiment perhaps this is a clumsy attempt to engineer a change in sentiment.
    While the world may be a better place if we all smile it probably wont make any difference to the economy or to the fact that some banks are insolvent and some are suffering from a liquidity shortage.

  24. Anonymous

    One more exercise in kicking the can down the road while the looting intensifies. Soon, however, the road will end. m.

  25. daveNYC

    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.

    The banks have passed the stress test, but will need more money. It’s like 1984’s Newspeak combined with the dark comedy of Catch-22’s Milo Minderbinder.

  26. Anonymous

    alex wrote: “Don’t worry, they won’t shoot us. They need someone to work and pay off the enormous debt they’re creating”

    Wrong. Their goal is to destroy us, themselves, everyone. Hard to grasp that evil exists, but that’s the truth of it. Destroy. Take the bread from your mouth. Kill your children. The inverted morality of blank out and evade reality.

  27. doc holiday

    Oh for pity sake and gads, the lieing crap from these fools is amazing! Wells Fargo today is totally full of crap saying, the losses in the acquistion are behind Wells Fargo! Lies, more lies and lies squared will give a nice temp gain to the share price, but as unemployment rockets and national debt increases and productivity increases, how are these lieing crapbags going to sustain earnings …. huh, huh ……. I'll tell you how, Moody's, S&P, Fitch and SEC, FASB and Obama will cheer on fraud and forgive the fraud that got us here, and in the meantime, wall street will look to inflate a new financial bubble, as economic hyper-inflation sets in with real unemployment and losses that will seem somewhat at odds with this bullshit! The capitalist system is very broken and shifting rapidly to communism — but is this a shock, given the fact that American debt is in the hands of the communists?

    * No spell check was used in this post and the thoughts of the writer were on the fly and off the cuff. This is NakedCapitalism.

  28. rd

    When you send your kids to college, you are told that they are adults now and their grades at school, etc. are private. You are then told how much it is going to cost and where you need to send the check to cover their costs. With this system of the student’s credit backstopped by the parents full faith and credit as well as Treasury, college tuition has been rising at twice the rate of inflation.

    We have the same model for the banking system. al the banks are adults who can look after themselves in the privacy of their offices, executive jets, and business meetings at resorts. All we have to do is send them regular checks to fund this lifestyle so they won’t crush the world’s financial system again. Sounds just like the typical teenage college student.

  29. lambert strether

    Yves, you’re not thinking. If the stress testers looked at the loan tapes, that would reveal massive accounting control fraud, and the whole shell game would collapse, and that would be bad, because every time a bankster sheds a tear, a kitten dies. So move along, people, move along! There’s no story here.

    Incidentally, I keep asking this question, and maybe somebody here can answer it: If the mortgages that underly derivatives are fraudulent, what happens to the derivatives? Do they have to be honored?

  30. Cat

    Lies, yes. Insane, probably not. The usual comment here is "they are looting us" as if where the money goes is the only relevant issue. So, you are all bankers I guess. Nothing wrong in that.

    Here's what I'm worried about: Someone ran a bunch of numbers through some models, collated the output into suites of predictions, and shat a brick. I suspect that, within reasonable bounds, the most likely outcome was titled "Oh My F*&king God" with the subtitle "We are so totally dead now."

    When you are about to die and you know it you do stuff you might not normally do. You do stuff that looks insane, immoral and inefficient because nobody is going to hold you to any standards of conduct later because you will be — well — dead.

    It's a black box, and we're all looking at the output and trying to understand WTF they are doing inside. OK, I think they are losing their minds in terror.


  31. Anonymous

    “The whole point of this charade exercise was to show the big banks weren’t terminal but still needed dough.” Kind of like they are not insolvent enough to be taken over by the FDIC, but still need the Geithner And Summers Plan (GASP) to bail them out…

    “Citi nearly went under in the early 1990s… The banks used their own risk models to make the assessment, for instance, the very same risk models that caused this mess.”

    If Citi and others are allowed to get away with this a second time, what will be the quality of economic growth in the US over the next two decades? Is the next bail-out really likely to be smaller? What if growth is so poor and the scale of the next crisis is so large that it pulls the US economy into a fiscal trap?

    It would be better if the democrats in congress would just offer to buy troubled properties at their long term Case-Shiller equilibrium prices outright. While they are at it, they could use additional funds to beef up their capacity to take over larger institutions. While those institutions might claim that the “legal issues are too complex for anyone to manage,” their derivative portfolios are “too complex for anyone to understand,” and that the credit markets will seize up forever – it is more likely that they will be using those derivative portfolios to pay their legal fees, their FDIC insured deposits will find their way to banks that are better managed, those “good banks” will become even more solvent, and this will resolve the credit crisis and prevent an even larger one from forming in the future.

    Have the democrats in congress considered using the judicial branch of government yet? That might provide some leverage…

  32. Minh


    The bank stress tests currently underway are “a complete sham,” says William Black, a former senior bank regulator and S&L prosecutor, and currently an Associate Professor of Economics and Law at the University of Missouri – Kansas City. “It’s a Potemkin model. Built to fool people.” Like many others, Black believes the “worst case scenario” used in the stress test don’t go far enough.

    He detailed these and related concerns in a recent interview with Naked Capitalism. But Black, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis, says the program's failings go way beyond such technical issues. “There is no real purpose [of the stress test] other than to fool us. To make us chumps,” Black says.

  33. Anonymous

    Breathe in, breathe out. There is a secret I’d like to share. A simple solution to all these crimes is making itself known.

    Do nothing. The system is cannibalizing itself and the faster they print and hide problems the sooner it will crash. The secret is without job creation and steadily increasing unemployment you will have default, hardship and punishment.

    The level of stress and the constant bombardment of continuing affronts is bad for your mental health. Let it go and enjoy your day, your family and your life. Take some basic steps to ensure you have the basics covered. The endgame is in motion but the end also means a new beginning.

    The good times always end but so do the bad times. The infrastructure, educated population and means to rebuild will remain. Stop playing the game. Let them fail.

  34. John

    You have to love all the conspiracy theorists, permabears, members of the people’s soviet, shorters, nihilists, and Republican fatheads commenting on this topic. It would have been surprising if many had failed. We’ve pumped billions into these institutions, the fed has taken some 1.4 trillion of toxic assets off them below the radar, they are not lending at the rate they’ve taken money in, and many of their trad businesses are making money. Duh. Add to this the hysteria about the class 1 and 2 assets these guys still have on the books from no nothings. Sorry guys you’re going to be disappointed. The banks are not going to fail or be nationalized. The winter palace is not going to be stormed. The sky isn’t going to fall. Take a piill and grow up.

  35. Anonymous

    if we don’t have enough manpower devoted to even run a proper stress test, doesn’t that suggest we don’t have enough manpower to nationalize the banks?


  36. Stephen


    Great piece.

    The stress test is an idea that has popped up in a number of places but most prominently from the Governor of the Bank of Canada.

    Now the interesting part, conveniently forgotten by any and all American commentators is that the stress test really amounts to an international peer review of your system.

    Do I believe the US is going to allow an international team of Bank regulators from Canada, Germany, Australia, Spain, Japan and GASP France to come in and look….it is the right thing to do but they won’t do it.

    Obama may be an internationalist, but economics is not his strong suit and he will defer to Summers and Geithner. Us banking and finance will remain a black box.

  37. Anonymous

    Thanks for the article….it really is time for us to start thinking of how we will survive and help our neighbors make it too..we can longer believe our morally corrupt government will be our savior…in the past there was compassion and concern for others, there was honesty and integrety, there was hope and goodness….these are the values we need to return to…I’m sick of the rest…how about you…how about a commit to beneficial change …..blessings

  38. Anonymous


    John Goodman’s line in the bowling ally parking lot, the movie The Big Lebowski.

    Dude, nihilists, they have no ethos!

    Skippy…are you the ghost of John Goodman.

  39. Carlos

    “If you believe that, I have a bridge I’d like to sell you.”

    Sorry but that bridge has been already bought by China. Together with several trillions of US debt and a bunch of little green pieces of paper

  40. john

    If distressed investor Leon Black is forecasting $2T more in real estate losses, we gots troubles a plenty ahead.

    Garbage in, garbage out seems to be the case indeed. Understaffed bank examiners stress tests will have to rely on bankster models and teh “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).

    Now if I could emulaet Dearieme and be just a bit less wordy :-)

  41. Early Withdrawal

    lets cut the crap and put just two sentences from this rubbish next to each other:

    “the banking industry, broadly speaking, seems to be in better shape than many people think”

    “many of the largest American lenders, despite all those bailouts, probably need to be bailed out again”

    Now, if you were to put those back to back in a term paper you would mostly certainly get at best a D for contradicting yourself with two opposing thesis statements.

    The only proper way to deal with this insanely poor writing is to vilify the author. Eric Dash you sir are moron.

  42. LeeAnne


    They may be all losing their minds in terror but ‘they’ are the same who presided over the dismantling of rules and laws designed to prevent this thoroughly predictable outcome.

    How can you care about the pitchfork coming at you when the alternative is to leave the cult with nothing on your back, no marketable skills, and no friends or family.

    By no marketable skills, I mean nothing sufficient to sustain your lifestyle entitlement fantasy.

  43. Anonymous

    I use to say, “No transparency, stoneage” as a pithy way to get my point across.

    Now I believe that if we actually got transparency, it’s stoneage.

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