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Stress test a joke

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May 08, 2009 – Comments (7)

I really had not followed the details of the stress test but Big Picture did a post on the stress test leverage, 25 to 1!!!!!

 Big Picture talks about how leverage used to be 12 to 1, but I believe if you look even further back it was 8 to 1.  Twelve to 1 was already a weakened ratio for leverage and 25 to 1 is insane.  During the depression 12% of bank deposits were never repaid.  That suggests financial safety of deposits requires leverage to be set to 8 to 1.

Lol, and look at the logic for allowing 25 to 1, so banks can earn their way out of this mess.  More likely so they can put more money at risk and loose it.

7 Comments – Post Your Own

#1) On May 08, 2009 at 8:45 AM, dwot (42.57) wrote:

Here is another analysis of the banks, 15 would fail.

Got to love the quote here:

“The stress tests results are akin to ratings,” declared Weiss, formerly the president of a national rating agency. “But no objective rating agency would stand behind them. The exams are too easy; the banks get to take them home with cheat sheets; and if they don’t like their final grade, they can appeal for a better one. If, despite all this, some large institutions still come up short on capital, it will imply far deeper troubles than the Treasury or the Fed dare admit.”

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#2) On May 08, 2009 at 8:54 AM, automaticaev (30.11) wrote:

want to steal money?  Dont rob a bank open one.

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#3) On May 08, 2009 at 9:11 AM, alstry (34.92) wrote:

DWOT....

they are not going to put money at grisk....they are simply going to get $$$ from the government at little or no interest and buy treasuries and increasing rates and spreads......

Consumers and businesses will be starved for cash and eventually banks and the government will own everything through businesses shutting down and  foreclosures.

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#4) On May 08, 2009 at 9:15 AM, automaticaev (30.11) wrote:

stealing is like all those words but simplified.  watch ill simplify your post, and make it more accurate.

 

they are not going to put money at grisk....they are simply going to STEAL $$$

Consumers and businesses will be ROBBED  for cash and eventually banks and the government will STEAL  everything.

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#5) On May 08, 2009 at 9:28 AM, StopLaughing (< 20) wrote:

So far Jan. had the highest unemployment. Normally, about 2 months after the highest unemployment month the economy bottoms (Mar.).

We still have UAW layoffs ahead but they get 90% of pay for not working. There is little loss of purchasing power. Supplier layoffs may be more serious. 

It is possible that the bottom is in on this recession. This could be a V bottom, but I think unemployment will tend to stay high.

The Stress Tests are political slight of hand. However, the Gov does have the data and can make any set of alternate assumptions that they want and not release the results. They know how much they are going to have to cough up to keep the banks afloat under any set of assumptions.

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#6) On May 08, 2009 at 9:45 AM, Gemini846 (50.01) wrote:

The stress test was never to see which banks wouldn't make the grade. It was to determine how much money they needed to "preserve" the government's stake in them. Its all a bunch of hookey.

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#7) On May 08, 2009 at 9:55 AM, dbjella (< 20) wrote:

These banks will not fail.  The Feds will do whatever is needed.  I wonder what WAMU did that pissed them off?  Since then, the gov't has been all in.

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