Bank Stress test results may cause panic scenario

[NorthernSanctuary]

The following is an interesting post from GLP that tries to connect some interesting dots for a possible scenario :

"
Market Watch- April 15, 2009 – Bank Stress tests to be revealed! Hypothetical scenario based on postings in yesterdays thread!
Quote


First, what I like about the GLP community is that there are contributors who often offer pieces of information that are often part of a larger puzzle. Yesterday’s thread ‘hank’ posted a link to site that had some very interesting statistical data regarding market trends. That site is here:
http://www.nowandfutures.com/buscycle.htm


The article is about a ten minute read and the data presented is compelling. Bottom line for the near term is that April 23 may very well be a key date in taking the downturn to the next level.

When I got up this morning and saw that the results of the bank stress tests would be revealed it got me thinking about a hypothetical scenario that could push us down with furious abandon.

First the stress tests!
U.S. planning to reveal data on health of top banks
http://www.reuters.com/article/GCA-C...53E0ZW20090415

The Obama administration is drawing up plans to disclose the financial condition of the 19 biggest banks in the country, the New York Times said, citing senior administration officials.

The administration has decided to reveal some sensitive details of the "stress tests" now being completed after concluding that keeping many of the findings secret could send investors fleeing from financial institutions rumored to be weakest, the paper said.

Disclosing Bank “Stress Test” Numbers: Good Way To Cause Panic
http://247wallst.com/2009/04/15/disc...o-cause-panic/

Looking at the balancing act between disclosure and the concern that banks that get poor grade for the “stress test” will face sell-offs in their stocks, the government has decided to lean toward telling the public the results of its work. Accoridng to The New York Times, “The administration has decided to reveal some sensitive details of the stress tests now being completed after concluding that keeping many of the findings secret could send investors fleeing from financial institutions rumored to be weakest.” That is an odd position to take. The banks which are at the bottom of the list will almost certainly face panicked shareholders.

The government is damned if it does not release the data and it is damned if it does. Over the last year, the stocks of the largest banks have largely moved up and down in concert with one another. Once Wall St. percieves some of the firms as being significantly troubled, the sell-offs in their stocks will be rapid and damaging. Low share prices will mean more dilution when capital has to be raised. The US banking system will be broken into two pieces.

So here is my hypothetical scenario. The dates may be just a tad off but let your mind play around the general timeframe.

Monday April 20, 2009
The results of the bank stress test are released and there a several banks deemed significantly in trouble. That evening on the national news at 6:30 PM the results are discussed and those who are completely oblivious to current events become aware that their bank is in trouble.

Run on the banks that are deemed significantly troubled?
Tuesday April 21, 2009
The people who have bank accounts in banks that the talking heads said were in trouble the night before on their primetime network news broadcast begin the process of withdrawing funds. By noon word filters around the internet of bank runs on the troubled banks. That evening on the national news at 6:30 there are news segments showing lines at the troubled banks and ‘bank runs’ is mentioned in the news piece.

Wednesday April 22, 2009
The bank runs continue and deplete the reserves of the troubled banks and even banks that were not deemed in trouble by the stress test results due to misinformation. This is also the day that the Bank Reserve Settlement is posted. Failure to meet reserve requirements would mean the federal funds rate market would feel the brunt of it since the funds rate is what they charge each other. There is a backlash in markets due to all the volatility and the sell orders begin to flood in. Again the nightly news spreads more fear into the American psyche.

Thursday April 23, 2009
A bank holiday is declared and the market gets hammered taking us to fresh lows for this recession.

Before you think this too farfetched please read the article that ‘hank’ linked up that was written in 1999. The last critical date prior to the April 23, 2009 date was February 27, 2007. What happened on that day?

Brutal day on Wall Street
Dow tumbles 416, biggest one-day point loss since 2001, as investors eye China, drop in durable orders.
http://money.cnn.com/2007/02/27/mark...0630/index.htm

Again, I want to state that I am just piecing this together thanks to the collective efforts of ‘hank’, Avian , Ice and various AC’s. They laid the groundwork in yesterday’s thread.
http://www.godlikeproductions.com/fo...sage770325/pg2
"

[Anchor]

Release it, it will get the overall job done quicker.

It seems like peeling an elastoplast that is well stuck to your skin ... do you do it fast or slow? Fast = more pain less duration, slow = perhaps less pain, but for longer.

[NorthernSanctuary]

Release it, it will get the overall job done quicker.

It seems like peeling an elastoplast that is well stuck to your skin ... do you do it fast or slow? Fast = more pain less duration, slow = perhaps less pain, but for longer.

But is it one elastoplast stuck to your skin, or is it 10 or 50? and are they all small, or do you have some big ones on your hairy parts?

[NorthernSanctuary]

Turner claims to have bank stress test results
Quote


and they are worse than bad.

http://turnerradionetwork.blogspot.c...st-reults.html

Sunday, April 19, 2009
LEAKED! Bank Stress Test Reults !
The Turner Radio Network has obtained "stress test" results for the top 19 Banks in the USA.

The stress tests were conducted to determine how well, if at all, the top 19 banks in the USA could withstand further or future economic hardship.

When the tests were completed, regulators within the Treasury and inside the Federal Reserve began bickering with each other as to whether or not the test results should be made public. That bickering continues to this very day as evidenced by this "main stream media" report.

The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below.

1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.

2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.

3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.

4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.

5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.

6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital!

7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts!

The debt crisis is much greater than the government has reported. The FDIC`s "Problem List" of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.

Put bluntly, the entire US Banking System is in complete and total collapse.

More details as they become available. . . . . .


UPDATE 0147 HRS EDT Monday, April 20, 2009 --

For those who may be skeptical about the veracity of the stress test report above, be reminded that only last Sunday, April 12, this radio network obtained and published a Department of Homeland Security (DHS) Memo outlining their concerns that returning US military vets posed a domestic security threat as "right wing extremists." That memo, available here, is marked "FOR OFFICIAL USE ONLY" and contained strict warnings that it was not to be released to the public or to the media. We obtained it and published it days before other media outlets.

That DHS report appeared on this blog at least two full days before the story was picked up by The Washington Times, and virtually every other US media outlet.

Details of certain aspects of the stress test reported above have now been CONFIRMED through REUTERS News service when they disclosed the risk-capital percentages publicly on April 6, 2009 at this link

Further, todays Wall Street Journal (April 20, 2009) is confirming at this link that lending by the largest banks has DECREASED 23% since the government began the T.A.R.P. program, causing many in Congress to ask where the money has actually been going. Apparently, it has been going into propping-up the failing banks instead of out in loans to the public.

Additional details and proofs are forthcoming. . . . . continue to check back on this developing story.

[peaceandlove]

Treasury: Caught Lying Again

Karl Denninger Blog

http://market-ticker.denninger.net/a...ing-Again.html

4/20/2009

Excerpt:

This appears to have led to Treasury issuing the following statement this morning:

The U.S. Treasury Department has not yet received the results of "stress tests'' on the health of the nation's 19 top banks, spokesman Andrew Williams said Monday, after a blog said it had obtained the test results and some U.S. bank shares moved lower.

That's a lie.

How do we know its a lie?

Because of this from April 10th:

April 10 (Bloomberg) -- The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.

The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. Such a scenario might push stock prices lower for banks perceived as weak and interfere with the government’s plan to release the results in an orderly fashion later this month.

How can you be ordered not to release something you don't have?

Since that was published on the 10th of April, we therefore know that the results exist and Treasury, the banks involved and The Fed have them, as The Fed was concerned that some banks might try to use them (perhaps in a misleading fashion) during their first quarter conference calls and earnings releases.

Sorry guys, but whether Hal Turner has the real results or not is no longer material. What's material is the claim that Treasury doesn't have them, since they told the banks on the 10th not to release them, and you can't release what you don't have.

The problem with lying is that eventually you forget your previous lies and thus get caught when you contradict yourself.

My response to Treasury's claim is best expressed thus:

STOP LYING TIMMY; THE MARKET IS REACTING VERY, VERY BADLY TO THIS OBVIOUS AND TRANSPARENT LOAD OF **** YOU ARE TRYING TO FOIST OFF ON IT THIS MORNING.

[NorthernSanctuary]

Big bank profits are bogus! Massive public deception!
Quote


A big bank CEO on a mission to deceive the public doesn’t have to tell outright lies. He can con people just as easily by using “perfectly legal” tricks, shams, and accounting ruses.

First, I’ll give you the big-picture facts. Then, I’ll show you how big U.S. banks are painting lipstick on some of the fattest pigs ever raised.

Six of America’s Largest
Banks at Risk of Failure

As we have written here so often … as we documented in our recent white paper … as we showed in our presentation to the National Press Club … and as we explained again with new data in our follow-up press conference, the nation’s banking troubles are many times more severe than the authorities are admitting.

First, look at the megabanks: The authorities SAY that all of the 14 largest banks have earned a “passing” grade in their just-completed “stress tests.” But just six months ago, the authorities swore that, without a massive injection of taxpayer funds, those same banks would suffer a fatal meltdown.

Was the bad-debt disease magically cured? Did the economy miraculously turn around? Not quite. In fact, we have overwhelming evidence that the condition of the nation’s banks has deteriorated massively since then.

How can our trusted authorities be so blatantly deceptive and still keep their jobs? Perhaps you should ask Fed Chairman Ben Bernanke. Not long ago, for example, he declared that the total losses from the debt crisis would not exceed $100 billion, while conveying the hope that most of those losses could be soon written off. Also around that time, the International Monetary Fund (IMF) estimated the losses would be $1 trillion, with only a small percentage written off.

The IMF’s latest estimate: $4 trillion in losses, with only one-third of those written off so far. Bernanke’s error factor: He was 4,000 percent off the mark, in a world where 50 percent errors can be lethal.

Meanwhile, based on fourth quarter Fed data, we find that, among the nation’s megabanks, six are at risk of failure in our opinion (seven if you count Wachovia and Wells Fargo as separate institutions).

JPMorgan Chase is the nation’s largest, with $1.7 trillion in assets in its primary banking unit. It’s massively exposed to defaults by its trading partners in derivatives — to the tune of 382 percent (almost four times) its risk-based capital. Plus, since it holds HALF of ALL the derivatives in the U.S. banking industry, JPMorgan is at ground zero in the debt crisis.


Citibank is the nation’s third largest, with assets of $1.2 trillion in its main banking unit. Its total credit exposure to derivatives is a bit lower than Morgan’s, at 278 percent, but still extremely high. Plus, it has other troubles, especially the surging default rates in its sprawling global portfolio of credit cards and other consumer loans. (More on these in a moment.)

Wells Fargo and Wachovia now make up the nation’s fourth largest bank with combined assets of $1.17 trillion. But in the fourth quarter, they still reported separately, which is illuminating: Even without Wachovia’s troubled assets, TheStreet.com Ratings has downgraded Wells Fargo to a D+. Wachovia, meanwhile, got a D. This tells you that Wells Fargo wasn’t exactly the best merger partner, unless you believe in some bizarre math wherein adding two negatives somehow gives you a positive result.

SunTrust, with $185 billion in assets, is getting hit hard by the collapse in the commercial real estate. Its Financial Strength Rating is D+.

HSBC Bank USA has massive credit exposure to derivatives that’s even greater than Morgan’s: 550 percent of risk-based capital. We’re not looking at its larger foreign operations. But the U.S. numbers are ugly enough, meriting a rating of D+.

Goldman Sachs, which reported for the first time as a commercial bank in the fourth quarter, seems to be taking the biggest risks of all in derivatives. Its total credit exposure is 1,056 percent of capital. Bottom line: It debuts as a bank with a rating of D, on par with Wachovia.
Regional banks: Banking regulators have been largely mute regarding major regional banks. But several are also at risk of failure, including Compass Bank (Alabama), Fifth Third (Michigan), Huntington (Ohio), and E*Trade Bank (Virginia). Primary reason: Massive losses in commercial real estate loans.

Smaller banks: On its “Problem List,” the FDIC reports only 252 institutions with assets of $159 billion. In contrast, our list of at-risk institutions includes 1,816 banks and thrifts with $4.67 trillion in assets. That’s seven times the number of institutions and 29 times more assets at risk than the FDIC admits.

What Explains the Huge Gap Between
Official Declarations and Our Analysis?

We all use essentially the same data. And conceptually, the analytical approach is also similar.

The primary difference is that the regulators have an agenda: Instead of protecting the people from bank failures, they’re trying harder than ever to protect failed banks from the people. Specifically …

They have forever hidden the names of the banks on the FDIC’s “Problem List,” making it almost impossible for average consumers to get prior warnings of troubles.

They have never disclosed their own official ratings of the banks — the CAMELS ratings — making it difficult for the public to find safe institutions they can trust.

They have religiously underestimated — or understated — the depth and breadth of the debt crisis.

And as I explained a moment ago, they have rigged their recent stress tests to give passing grades to all of the nation’s 14 largest banks, sending the false signal that even the most dangerous among them are somehow “safe.”
Legal Cover-Ups, Flim-Flam and Sham
In the Big Bank’s “Glowing”
First-Quarter Earnings Reports

Wall Street is aglow with the latest “better-than-expected” earnings reports by major banks. But take one look below the surface, and you’ll see three of the most egregious accounting gimmicks in recent history.

Gimmick #1. Toxic asset cover-up. In their infinite wisdom, global banking regulators have now agreed to let banks cover up their toxic assets by booking them at fluffy-high values, bearing little resemblance to actual market prices. Like magic, the bad assets are suddenly worth more, as hundreds of billions in losses are defined away.

Gimmick #2. Reserve flim-flam. Every quarter, banks are required to estimate their losses and decide how much to set aside in loss reserves. If they deliberately guess too much in one quarter and too little in the next, they can shove all their bad earnings into earlier P&Ls and make future P&Ls look rosy by comparison.

Gimmick #3. The great debt sham. Consider this scenario: A financially distressed real estate developer owes the bank $4 million. His revenues have plunged. He’s lost a fortune in his properties. And he’s on the brink of bankruptcy.

Therefore, in the secondary market, traders recognize that loans like his are worth, say, only half their face value, or about $2 million. So far, a very common situation, right?

But now imagine this: He walks into the bank one morning and claims that he really owes only $2 million. Why? Because, in theory, he says, he could buy back his own loan for that price, thereby reducing his debt in half.

In practice, of course, that’s a pipedream. If he actually had the cash to buy back his own loans on the market, then he wouldn’t be financially distressed in the first place. And if he weren’t financially distressed, his loans wouldn’t be selling on the market for half price.

The reality is that he can’t buy back his own debt and never will. And even if he could someday, he will still be on the hook for the full $4 million unless and until he files for bankruptcy and the bankruptcy judge decides otherwise.

That’s why the government would never let real estate developers — or hardly anyone else, for that matter — mark down the debts on their books and still stay in business. But guess what? The government lets banks do precisely that!

It’s the ultimate double standard: The banks get away with inflating their toxic assets. But at the same time, they’re allowed to mark to market their own debts, which happen to be trading at huge discounts on the open market precisely because of their toxic assets.

Accountants call it a “credit value adjustment.” I call it cheating.

Finding all of this hard to believe? Then consider …

How Citigroup Mobilized ALL THREE of These
Gimmicks to Create One of the Greatest Accounting
Shams of All Time in Its First-Quarter Earnings Report

I’m outraged. But I’m glad to see that someone besides us is speaking out:

Meredith Whitney, one of the few no-nonsense analysts in the industry, says that the banks’ latest reports are, in essence, “a great whitewash.”

Jack T. Ciesielski, publisher of an accounting advisory service, calls it “junk income.”

And Saturday’s New York Times, picking up from their research, lays out precisely how Citigroup has transformed a massive loss into what appears to be a fat profit …
First, Citigroup deployed the Toxic Asset Cover-Up. By inflating the value of the bad assets on its books, it was able to beef up its after-tax profits by $413 million.

Second, Citigroup used the Reserve Flim-Flam gimmick: By (a) shoving most of its bad-debt losses into last year’s fourth quarter and (b) greatly understating its likely losses in the first quarter, the bank legally rigged its books to look like it had made major improvements. Even assuming no further deterioration in its loan portfolio, I estimate this gimmick alone bloated profits by at least another $1 billion.

Third, Citigroup went all out with the Great Debt Sham, marking down its own debt and creating an additional $2.7 billion in purely bogus profits from this maneuver alone.

So here’s Citigroup’s true math for the first quarter:

So-called “profit” $1.6 billion
Gimmick #1 $0.4 billion
Gimmick #2 $1.0 billion
Gimmick #3 $2.7 billion
Total gimmicks $4.1 billion

Actual result: $2.5 billion LOSS!


And all this despite the fact that Citigroup’s loan portfolios actually deteriorated further in the first quarter. Based on its Q1 2009 Quarterly Financial Data Supplement, we find that:


Net credit losses in Citi’s global credit card business surged from $1.67 billion at year-end 2008 to $1.94 billion by March 31. And compared to March 2008, they surged by a whopping 56 percent! (Page 9 of its data supplement.)

Foretelling future credit card losses, the delinquency rate (90+ days past due) on those credit cards jumped from 2.62 percent at year-end to 3.16 percent on March 31 (page 10).

Credit losses on consumer banking operations jumped from $3.442 billion on December 31 to $3.786 billion on March 31. And compared to the year-earlier period, they surged 66 percent (page 12).

By almost every measure, Citigroup’s first-quarter numbers are worse than they were just three months earlier and far worse than they were 12 months before.

My forecast: Citigroup’s effort last week to twist this into an “improvement” will go down in history as one of the greatest banking deceptions of all time.

But Citigroup is not the only one. Nearly all other major banks are suffering similar surges in their credit losses and delinquency rates. Nearly all are using at least one of the same gimmicks to bloat their first-quarter profits. And every single one is destined to see massive new losses, driving their shares to new lows and the banking system as a whole into a far more severe crisis.

Bottom line: Rather than the private-public partnership the government has called for to address the nation’s banking woes, we see little more than private-public collusion to hide the truth from the public, paper over the problems and, ultimately, sink the banks into an even deeper hole.

My Recommendations

In my book, The Ultimate Depression Survival Guide, I give you very detailed, step-by-step instructions on what to do immediately. Here’s a quick summary:

Step 1. Get away from risky stocks. Use the recent stock market rally as a selling opportunity — your second chance to get out of danger before it’s too late.

Step 2. Get out of sinking real estate. If there’s a temporary improvement in the market, grab it to sell the properties you’ve been wanting to sell all along.

Step 3. Raise as much cash as you possibly can — not only by selling stocks and real estate, but also by cutting expenses and selling other things you own.

Step 4. Make sure you keep your cash in one of the safe banks on the list we provide on the book’s resource page. Or better yet, follow my instructions on how to buy Treasury bills. They’re safer than any bank, with no limit on the Treasury’s direct guarantee.

Step 5. For assets you cannot sell, buy protection using exchange-traded funds that are designed to go UP when stocks fall. The more the market goes down, the more you make; and those profits can offset any losses you suffer in the stocks or real estate that you cannot sell.

Step 6. Later, get ready for the big bottom in nearly all markets. That’s when you should be able to lock in relatively safe interest rates of 10 percent or more for years to come … buy shares in our country’s best companies for pennies on the dollar … buy a dream home in a great location that’s practically being given away.
http://www.moneyandmarkets.com/big-b...eception-33228

[Northern Boy]

Kind of like being in a life boat out at sea with no oars or food.............. just a matter of time till the birds pick you apart

[Humble Janitor]

Just what has Timothy Geithner been smoking as of late?

It's gotta be some really good **** if it makes him say half the stuff he's saying.

[peaceandlove]

Don't Panic! Total banking collapse in May?

Interesting commentary by Mike at FeverIAm regarding bank stress tests along with article links:

April 20, 2009

Video (11:36): http://www.youtube.com/watch?v=p9jtL...e=channel_page


FeverIAm youtube channel: http://www.youtube.com/user/FeverIAm

[peaceandlove]

All stress test banks are solvent: Bernanke



By Mark Felsenthal and Alister Bull – 2 hrs 52 mins ago

WASHINGTON (Reuters) – All of the top 19 U.S. banks undergoing "stress tests" to gauge their ability to outlast an even deeper recession are solvent, and the exam results should reassure markets that banks can continue lending, Federal Reserve Chairman Ben Bernanke said on Thursday.

The results of the stress tests are due to be announced in detail at 5 p.m. EDT, including which banks are being required to add capital to buffer against a potential sharp downturn in the economy. The exams will establish capital buffers for each of the nation's 19 largest banks and lay out bank plans to boost capital if necessary.

"(This) is not a solvency test," Bernanke said in response to questions after speaking to a conference organized by the Chicago Fed. "All the banks, inclusive of the capital they received from the government, are solvent."

Article continues: http://news.yahoo.com/s/nm/us_usa_fed_bernanke



Interesting comments posted below the following article at C4L!!!

Fed’s Bank Results ‘Reassuring,’ Show No Insolvency

By Rebecca Christie

May 7 (Bloomberg) -- Federal regulators today unveil what Treasury Secretary Timothy Geithner said will be a “reassuring” picture of a U.S. banking system able to withstand whatever stresses the recession may inflict on it once a handful of institutions add to their capital base.

Federal Reserve stress tests on the 19 biggest lenders show Bank of America Corp., Wells Fargo & Co. and Citigroup Inc. together require about $54 billion, said people familiar with the conclusions. At the same time, Goldman Sachs Group Inc., JPMorgan Chase & Co. and Bank of New York Mellon Corp. have enough capital to help prop up flows of credit to businesses and consumers grappling with the worst recession in five decades.

“There is very significant cushions in these institutions today, and all Americans should be confident that these institutions are going to be viable institutions going forward,” Geithner said yesterday in an interview with PBS television’s Charlie Rose program. “The results will be, on balance, reassuring.”

Article continues: http://www.campaignforliberty.com/wire.php?view=4866

[peaceandlove]

Mike at Fever I Am comments on Solvency Tests at beginning and end of this video with link to this article.

Don't Panic! Doctors to be told what to prescribe!

"The brown fecal matter is about to strike the oscillating device. Put on your special sunglasses with windshield wipers folks!"

Video (4:11): http://www.youtube.com/watch?v=IcHXw...e=channel_page



Banks Need Funds, but Taxpayers May Not Have to Pay

By ERIC DASH and LOUISE STORY

Published: May 6, 2009

The results of the bank stress tests have been trickling out for days, from Washington and from Wall Street, and the leaks seem to confirm what many bankers feel in their bones: despite all those bailouts, some of the nation’s largest banks still need more money.

Continues: http://www.nytimes.com/2009/05/07/bu...k.html?_r=1&hp

[peaceandlove]

From Karl Denninger Blog:

Fed Ducks Responsibility: Impeachment Time

Thursday, May 7. 2009

Bernanke this morning: (Bernanke Says Fed Monitoring Liquidity of Banks on Daily Basis: http://www.bloomberg.com/apps/news?p...6gQ&refer=home)

“The crisis revealed serious deficiencies on the part of some financial institutions” in risk-taking, capital adequacy and liquidity planning, Bernanke said today in a Chicago speech. “The crisis has likewise underscored the need for heightened vigilance and forcefulness on the part of supervisors.”

The stress tests have been “comprehensive, rigorous, forward-looking, and highly collaborative among the supervisory agencies,” Bernanke said in a speech transmitted by satellite to the Chicago Fed’s annual conference on bank structure and competition. The tests may help improve supervision in the future, he added, while not commenting on the results.

Nonsense.

If Ben Bernanke was serious about The Fed's regulatory role this mess could be cleaned up immediately.

Here's the rule for safety and soundness of any fractional reserve lending system:

No bank may have outstanding at any time unsecured loan balances exceeding their excess capital.

That's it.

Excerpt:

No bank should ever be able to come to the taxpayer for a bailout,and if we enforce the single basic rule of fractional reserve safety and soundness none ever will need to be bailed out, because it will be closed and liquidated before it can pose systemic risk.

We the people must insist that Congress force these clowns to do their jobs. They know the mathematical facts behind this, and that is in fact the only safe and sound way to run a banking system.

They're refusing because they also know that the banks have not conformed to this, do not conform now, and have and will bribe Congress and others to prevent this standard from being imposed on them, instead sucking off the taxpayer teat.

Continues: http://market-ticker.denninger.net/a...ment-Time.html



From the Market-Ticker

Wednesday, May 6. 2009

We Don't Learn From Our Mistakes

Posted in the forum; I thought this deserved wider distribution...



note the date on this - 1934.

We're so much wiser these days, aren't we?

Source: http://market-ticker.denninger.net/a...-Mistakes.html

[peaceandlove]

Karl Denninger Blog

Stress Tests: What's That Light?

Tuesday, May 5. 2009

It's a train.

The "rumor" floated over the weekend and this morning was that some of the banks might need $10 billion under the "stress" scenarios.

That they might be able to raise, and it has been part and parcel of fueling the rally.

Not so fast, grasshopper.

S&P yesterday afternoon stuck virtually the entire sector on Credit Watch Negative and that was just the start.

There are now some independent analysts out there with their own numbers on "required capital", and they're ugly.

Friedman Billing Ramsey came out and said they believed that Bank of America needs $60 billion all on its own, while Egan-Jones piped up and said the number was $100 billion!

SNL Financial, a research firm, thinks the number is $50 billion each for Citi and Bank of America - minimum - and might be closer to $70 billion for Bank of America.

Nor does it end there. Wells is projected to need $66 billion and JP Morgan needs $33b, according to these folks.

But if you think those numbers are a horror show, the real ugliness isn't found there. It is in fact found in all the foreclosed-but-unsold and not-yet-foreclosed "but will be" housing stock. Through the nation I am getting reports, some hard and some anecdotal, that lenders are sending out NODs (default notices) and then sitting on the process intentionally.

Why would they be doing that?

Continues: http://market-ticker.denninger.net/a...hat-Light.html

[Humble Janitor]

I wonder if there are people that WANT to see this panic scenario?

I really don't care what happens to the banks.