Fed says help for stress-tested banks available

[jtabeb]

So I guess they ALL FAILED, Right? (Since they ALL ARE ELIGIBLE for FED Aid).


"All 19 institutions subject to examination won’t be allowed to fail

BREAKING NEWS

updated 1 minute ago
WASHINGTON - The Federal Reserve says the government is prepared to rescue any of the banks that underwent "stress tests" and were deemed vulnerable if the recession worsened sharply.

The Fed says the 19 companies that hold one-half of the loans in the U.S. banking system won't be allowed to fail — even if they fared poorly on the stress tests.

The tests are intended to measure whether banks have enough capital to withstand losses on mortgages and other assets if unemployment rises and home prices fall further."

http://www.msnbc.msn.com/id/30390411

[JKD]

Re: Fed says help for stress-tested banks available

All 19 institutions subject to examination won’t be allowed to fail

BREAKING NEWS

updated 1 minute ago
WASHINGTON - The Federal Reserve says the government is prepared to rescue any of the banks that underwent "stress tests" and were deemed vulnerable if the recession worsened sharply.

The Fed says the 19 companies that hold one-half of the loans in the U.S. banking system won't be allowed to fail — even if they fared poorly on the stress tests.

The tests are intended to measure whether banks have enough capital to withstand losses on mortgages and other assets if unemployment rises and home prices fall further.

http://www.msnbc.msn.com/id/30390411

I am still wondering, what exactly is the purpose of the stress tests?

Everyone knows the banking system would have collapsed without intervention. Everyone knows that the banks are overestimating the value of their assets. Everyone knows the government will look the other way while the banks account for the value of their assets in whatever way necessary to show capital adequacy. Everyone knows that the Fed will not let any more banks fails ala Lehman. Everyone knows the positive carry gravy train will be kept open as long as need be to grow bank's capital organically. Everyone knows this is just an end-around way to transfer capital from savers to banks.

Really, what is the purpose of this whole thing? Can anyone show me an analyst or economist anywhere who believes the results of these tests will be a reliable reflection of the true condition of these banks, anyone?

Are we all sociopaths now?

John

[jtabeb]

Re: Fed says help for stress-tested banks available

I am still wondering, what exactly is the purpose of the stress tests?


Really, what is the purpose of this whole thing? Can anyone show me an analyst or economist anywhere who believes the results of these tests will be a reliable reflection of the true condition of these banks, anyone?

Are we all sociopaths now?

John

Yes
and here is what they want

Dow +160.09+2.01%
8,117.15Nasdaq +47.58+2.88%
1,699.79S&P +18.85+2.21%
870.77

[JKD]

Re: Fed says help for stress-tested banks available

Yes
and here is what they want

Dow +160.09+2.01%
8,117.15Nasdaq +47.58+2.88%
1,699.79S&P +18.85+2.21%
870.77

Selling the market here, financials in particular, definitely feels like the easy trade. And it is always the easy trade that takes your head off. If I saw more banks doing equity offerings it would make me feel better, at least the goosing of their stocks (which TPTB are certainly in favor of)would serve a purpose. Perhaps that is coming soon...

John

[nero3]

Re: Fed says help for stress-tested banks available

I think it's actually then it's more dangerous to buy, that is when things look better. The worse it looks, the less is the chance for a negative surprise.

[rjwjr]

Re: Fed says help for stress-tested banks available

I stumbled across these comments from Elizabeth Warren from a few days ago...

"I am so delighted they’re going to publish the numbers," she said, although she lamented that even she has not seen the details of the stress tests. She only knows what she reads in the media.

"I want to look at the stress test myself — I want to make sure it’s not a 2 mile per-hour walk on the treadmill," Warren added. "We don’t know the details. If we haven’t learned anything else, we’ve learned that in the money area, details are important."

And then this tidbit in a newsletter...

“A Federal Reserve document obtained by the AP shows that the stress tests take a harsher view of loans than of other troubled assets. This would mean that banks holding large loan portfolios would be viewed as being at greater risk than banks holding derivatives and debt securities. Wall Street’s former investment banks and the megabanks—JP Morgan, Citi and Bank of America— have large securities holdings, while regional banks tend to have a relatively larger portfolio of loans.

The AP raises the possibility that the reason the tests are biased in this way isn’t because the whole loan portfolios are actually riskier but because regulators want to make the Wall Street firms and the big banks look healthier.” (emphasis added)

“Stress Tests Are Biased In Favor Of Wall Street”
John Carney, April 24, 2009
http://www.businessinsider.com/stres...-street-2009-4

Which once again reflects the lack of transperancy of this entire charade. I don't know that it matters as much exactly what they are hiding as it matters just that they feel the need to hide it. That can only be good for gold.

[TRake]

Re: Fed says help for stress-tested banks available

I think it's actually then it's more dangerous to buy, that is when things look better. The worse it looks, the less is the chance for a negative surprise.

I agree with this statement! I stayed long financials over the weekend. I am scared, no doubt, but I am gambling on some kind of weekend news from our trustworthy government.

[Quincy K]

Re: Fed says help for stress-tested banks available

I agree with this statement! I stayed long financials over the weekend. I am scared, no doubt, but I am gambling on some kind of weekend news from our trustworthy government.

The game is rigged and controlled by a very few individuals.

Sometime in the near future, they're going to go bowling one weekend and agree to short each other while loading up on SKF and SRS after publically giving each other buy ratings.

Five weeks ago it was the end of the world. Then these guys go bowling on a Saturday night and decide to goose the markets and squeeze the shorts with a 25 percent rally. And all on declining fundamentals. Now everything is great, the recession is over, Cramer's back in the spotlight and everyone is drinking their $4.00 Starbucks and buying more sh_t they don't need.

And the sheeple are about to get fleeced again.

[TRake]

Re: Fed says help for stress-tested banks available

The game is rigged and controlled by a very few individuals.

Sometime in the near future, they're going to go bowling one weekend and agree to short each other while loading up on SKF and SRS after publically giving each other buy ratings.

Five weeks ago it was the end of the world. Then these guys go bowling on a Saturday night and decide to goose the markets and squeeze the shorts with a 25 percent rally. And all on declining fundamentals. Now everything is great, the recession is over, Cramer's back in the spotlight and everyone is drinking their $4.00 Starbucks and buying more sh_t they don't need.

And the sheeple are about to get fleeced again.

I fully understand this, but going short here is just as risky. The right move may be to straddle a financial that you think is too high. Puts and calls and if volatility increases, which I think is inevitable, your profit can too. I liked what I think was EJ's explanation of bear market rally's and PCE.

[JKD]

Re: Fed says help for stress-tested banks available

I think it's actually then it's more dangerous to buy, that is when things look better. The worse it looks, the less is the chance for a negative surprise.

Not sure if you are responding to my comment or not, but when I say "would make me feel better" it is in reference to the stress tests having a purpose, not feeling better about being long financials. If they are trying to goose the stocks higher, let's see them take advantage of it by raising some capital, like GS just did except much bigger.

I do not think I would ever feel good about buying financials.

John

[GRG55]

Re: Fed says help for stress-tested banks available

Best line today. From Zero Hedge, regarding the de-stress tests...

"...An online dating questionnaire is more probing."

Here's more; and some of the comments are pretty funny if you need a laugh.

Saturday, April 25, 2009

The Stress Test Cliff Notes

For those too lazy to click on the Federal Reserve link and read, below are some of the key points contained in the SCAP:

(1) “more than 150 senior supervisors, on-site examiners, analysts and economists” spent a month reviewing the 19 BHC’s that hold two thirds of the country’s bank assets and account for one half of the loans

More than 150 means at least 151. Is the US Iceland or something? Ten trillion dollars in assets and five hundred trillion dollars in derivatives in one month? A typical single bank examination utilizes hundreds of examiners and takes several months. Clearly the next release of public sector productivity numbers is going to astonish.

(2) ”the firms were asked to project…..the firms were asked to provide…etc.”

In other words, the banks tested themselves and the 150 examiners took their word for it. Any wonder they passed?

(3) “traditional role of capital, especially common equity, is to absorb unexpected losses and thus to protect depositors and other creditors. ”

Well, it used to be. Now that job has been outsourced to the US Taxpayer.

(4) “As a result of the loss recognition framework for assets in the accrual loan book, the results of this exercise are not comparable with those that would evaluate such assets on a mark-to-market basis”.

Absolutely. What does the market know anyway? The banks’ models got us into this calamity so damn if they can’t get us out!

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