Will The “Stress Test” Details Cause Panic?

Jeff Braun of the The Market Guardian recently wrote a post on the release of results from the financial institution "Stress Test." So how will these reports affect the market? Leave us a comment and let us know what you think the ultimate outcome of these results will be.

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News came out on April 15th from the Federal Reserve that they are going to release the results of the 19 bank stress test in early May. They used the tests to determine whether the top 19 banks have sufficient capital to cover loan losses during the next two years if the economy continues to shrink, unemployment surges and housing prices keep slipping lower.

Could the results cause a major panic and a run on some banks? It is hard to say but once Wall Street perceives some of the firms as being significantly troubled, the sell-offs in their stocks could be fast and furious. Low share prices will of course mean more dilution when capital has to be raised. The perception of the banks that fall into the group of the “weak” may not recover from the news. And, the whole process will inevitably raise the question of what will be done to the most troubled banks.

Ok Seriously, our government is going to make each and every large bank whole come hell or high water. They say “in a systemic way” so in my opinion that means the government will reveal the stress test results depending upon market conditions during that time. These stress tests are nothing more than applying economic projections of growth, employment, consumer spending, loan losses, etc. Given the fact that our beloved leaders have been chanting “recovery in the future”, the banks will not be “stressed” at all by this government data.

“The Secretary and the Department of the Treasury have long recognized that transparency was important for taxpayers, important for the banks and important for the overall stability of the financial system,” said White House spokesman Robert Gibbs. “And I think that’s what you’ll see.”

Hey Robert Gibbs please give me a break. They conduct a “stress test” way too late in the game. What are they going to say now that they’ve handed out Hundreds of Billions to the banks? Sorry BAC, but you have failed the stress test and now we have to close your doors tomorrow. This stress test is designed to create confidence in the banking system, not to uncover insolvent institutions. Do you think they are going to show the over $130 trillion of toxic derivatives sitting in the basements of these banks? Of course not! This seems like just one big sham to me.

Best,

Jeff Braun

The Market Guardian


20 thoughts on “Will The “Stress Test” Details Cause Panic?

  1. Welcome to the world of deception

    If you are a seasonsed veteran of looking into these "shysters" you can almost gaurantee everyting they spout off is .....some sort of deception .....since there are no reprecussion's for lying....just an easer way to get money or move up the corporate ladder.

    If you are new to the scam you may at first find it difficult to believe the fraud, deception, and fantasy that goes on thru the incestous relationship between gov't and financiers......since most people get their INFO from the MSM .....(who simply don't cover story's that put their paying financial advertisor's in a negative insolvent light) the sheeple find it hard to believe this nonsense is occuring (actually it re-occurs with each "new" administration.

    How do you Declare Banks pass stress tests with one hand and then in the other shove money into their back pockets? without huge taxpayer backlash?

    Just make it a little complex and don't report the deception of the plan in the MSM...and the sheeple won't catch on .....just like with the Publc-private investment plan (geithner's bank plan) i remember Obama saying over a month ago that going forward they would have to be VERY "careful" with the way we "fix" the banking system and being smart about the way these plans are passed along....

    Creeps the editors of many MSM financial magazine's don't want to rain on the too big too fail (bank's) plan's of subtly transfering their liability's to the taxpayer so they keep quiet or obfuscate the story (which they are seasoned pro's at doing)....we are in very difficult times .....and nothing would surprise me

  2. The outcome of the stress test is a done deal. The outcome was decided a while ago.

    Welcome to Wall Street Mr Obama, honest Main Street never stood a chance.

  3. "Some regulatory observers argue that Treasury may not be so enthusiastic about taking back the funds immediately because of the negative image that it might have on the bank's struggling rivals."

    Oh sure, heaven forbid that the public have any idea whether the bank they put their hard earned money in is in good shape or not.

    Shouldn't that be our right and our choice to know the condition of the bank we put our money in?

    Who the hell are they to keep us in the dark?

  4. The only thing I trust is the money in my mattress and the .44 caliber under the pillow. LOL... Everything else is political fluff and shell games. It's all about mis-direction and them wanting us to take the "eye off the ball".

    If the banks have so much cash then why are my taxes going to support their balance sheets?

    Thanks to all for commenting on my post!

  5. Wall St. rules Washington because it is the major source of over the table (i.e.campaign contributions) and under the table (book purchases, speech payments, consultant fees, Blago payments, future employment promises,etc) payments to the politicians. Follow the money. Summers, Rubin and Clinton are obvious examples. I definitely would not expect much transparency from the so called "stress test". If all the risk is transferred from Wall St. to the taxpayers Wall St. will always be stress free and rich and the politicians will continue to get their 10% free money finders fee. But -- Loading more debt on the consumer (70% of the economy) will not restore consumption or the economy.

  6. total deception. gs changed their reporting quarters to eliminate dec, when they took massive writeoffs - at the gov blessings! i don't trust anything coming from this administration and fear for our country. is there anyone in our financial press to sound the alarm?

  7. Jeff,

    I think you have a very valid point US government is not going to create any panic now considering the huge sum of TARP money given the financial institutions in order to make them solvent.

    I understand that no matter how much loud they say that government will be transparent in revealing the true health of the banks but as you mentioned they would not want to create panic now especially after the 30% jump in DJI and S&P and creating the positive wave in the market.

    But I think government would not allow these big banks to fail but at the same time do you think even after being solvent enough by getting tax payer money, these banks are giving loans in the market or just trying to fix holes in there troubled balance sheets?

    Thanks n Rgds,

    Hemant Lulla

  8. It is very interesting to notice that the bank index has rallied exactly 100% ffrom its low. The other negative point is that almost all of the sentiment indicators are in very bearish ground here--Investors Intelligence, Rydex bull-bear, put-call ratios and decreasing volume as we have attempted to rally.

    Finally, look at the Dow and see that given all of the optimism we have only rallied into massive resistance. The next leg down, most likely, the most dramatic one yet is nigh.

  9. FRB just wants to keep the party going. i.e sweeping the dirt underneath the carpet.
    These institutions are corrupt in their "BS" accounting rules and need to come to realty with the balance sheets. They are just covering things up to the public and are all full of it. BAC,C,JPM etc Unemployment,forclosure,retail sales,GDP. I dont see the growth..do you?

  10. The talking heads refered to are "not allowed" to ask certain questions. Notice that Dylan Ratigan from CNBC has been let go. He did ask the tough question and his contract was "not renewed". As Mr. Ratigan was pushing for true answers to difficult questions. First of which, how come Barney Frank, Christopher Dodd ARE NOT IN JAIL. Many in congress should be the first to be shown justice.
    But I doubt it will ever happen, too much power from Nancy and her friends.

  11. $130 Trillion in toxic derivatives at US banks? Seems way inflated. I'd have to see some backup on that figure to believe it.

  12. a sham indeed. i have marked may 1st on my calandar to go long again..after the coming correction in the sp500. softball stress test that all will pass, some perhaps a bit better then others but still...C or better for all concerned.
    which raises the question...if they all pass, why are they putting aside another 2 trilion for rescue of one form or another?
    and if the assest on the books are so solid and will be held to maturity and maturiy comes well after this miraculous recovery that is about to happen ..the why the PPIP give away??
    talking heads on TV don't seem to ask these obvious and simple questions of anyone.
    so much for transparency.
    my only hope is that Obama et al are simply scared ****less at the real story and just trying hard to buy time. otherwise i am deeply disappointed in the colusion.

  13. Just another attempt by our government to pump the market. I would not be surprised to see a rosy picture of banks in order to cover the downside of GM filing BK around the same time.

  14. Never underestimate the slippery lawyer at the helm, and the gangsters in the back room.
    Corruption doesn't begin to describe how wall street rules the world, and woe betide anyone who gets in the way.
    Change you can believe in? That'll be the nickels and dimes that are left for the masses while the bankers trouser billions, laughing all the way to the, er, bank.

  15. The Federal Reserve Board (FRB), America's Central Bank, along with all other Central Banks, is based on the false premise that central planning of an economy is a sound idea; it isn't. Both the Soviet Union and communist China had Central Planning and only to the extent that a free market is allowed are either of those systems capable of generating prosperity for their citizens.

    The very instability of our economy is the result of the FRB central planners dictating interest rates and money supply - and devaluing our dollar's purchasing power by 98% since the FRB's inception.

    So to say that "transparency" is the goal is quite deceptive - it's more smoke and mirrors; the game is rigged to protect the banking elites as will be the results of this "stress" test. "BS" doesn't just stand for Banking System you know.

  16. just curious where you came up with 130 trillion? One of my biggest complaints about the obama administration and the bailouts is that the banks are being allowed to keep their books closed.

  17. Jeff is absolutely correct in his assumptions.!
    In fact..Given the recent FASB accounting changes, the unbelievable bank profits..If one were to take gov't announcements and reverse them,
    you would have a true picture..
    Remember..the gov't pronouncements are for the average joe and are in essence...cheerleading.
    It cannot be said often enough..this collapse was planned and has resulted in the largest transfer of wealth from the public to the private sector..read int'l banksters..
    T

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