All of the big banks are starting to show positive earnings and the future looks bright but can we trust the numbers?  The new stress test for banks that Tim Geithner has come up with is being called "A complete sham" by a formal bank regulator and "asinine" by the Chairman of Wells Fargo. 

Here's how it works for those of you who may not know...

The stress tests are to be finished no later than the end of April. They will evaluate the financial position of banks against two different scenarios, a baseline scenario consistent with consensus economic projections by several "forecasters", and a "more adverse scenario" that sees unemployment rising above 10 percent in 2010, and home prices falling another 22 percent in 2009.  The second scenarios seems much more plausible to me.  Keep in mind these are much of the same people that didn't have a clue we were getting into this mess.  And it goes on...

If a bank is deemed "under-capitalized" it will then have six months in to raise private capital before it must receive government aid.  If it needs the government aid, then convertible preferred secretaries will be provided that can be converted into common stock as needed.  How convenient!  More government aid.  Basically pulling money out of thin air.  Watch out inflation! 

And this is how Timmy is trying to instill confidence in the banks.  A little late maybe?

 How are we now just coming up with a test to determine the "health" of our nations banks.  Shouldn't this have been something in place like a million years ago so we could have seen the shady practices happening before they were to large to fix?  So the question is: are the banks really making any money or is this just more tricky accounting? 

Check out some more info below.  Or ask questions here.

Check out the full article.  Article 2.

Leave a Reply