tagged w/ Stress Test
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Yet again, I find myself having to get my US economic news from an international paper. The article says:
"US banks have been given government assurances they will be allowed to raise less than the $74.6bn in equity mandated by stress tests if earnings over the next six months outstrip regulators’ forecasts, bankers said.
The agreement, which was not mentioned when the government revealed the results on Thursday, means some banks may not have to raise as much equity through share issues and asset sales as the market is expecting. It could also increase the incentive for banks to book profits in the next two quarters. "
The government is giving the greedy, wild-risk-taking banks who created this crisis even MORE incentive to drive up short-term profits. According to the Financial Times, the stress test showed that by increasing short-term earnings, banks could be saved from raising up to $20bn in required capital.
I'm not a betting man, but if I was, I would guess that most of the banks will indeed show high enough "earnings" to make the stress test irrelevant. My own suspicions are that the banks will take advantage of the change in the mark-to-market accounting rules and look ridiculously profitable over the next two quarters.
Here is my parting food for thought:
Mark-to-market accounting was put into place on November 15 2007, http://www.cfo.com/article.cfm/10097878/c_10098290, (at the peak of the equity markets) and was changed back on April 2 2009, http://www.ft.com/cms/s/0/339b6e8c-1f8c-11de-a7a5-00144feabdc0.html (at the bottom of the equity markets). Coincidence? Please click the links and read the facts for yourself.Yet again, I find myself having to get my US economic news from an international... more
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Disclosures that at least six of the 19 big banks undergoing stress testing have been ordered to acquire more capital has not assuaged critics who contend that the tests are dangerously mild.
"This stress test is the equivalent of testing the Brooklyn Bridge by running a single heavy truck on it," Nassim Nicholas Taleb, a scholar of risk and chance at Polytechnic Institute of New York University, told the Huffington Post. "Bring engineers for this stress test, not the economists who failed us."
"The fact that six banks failed the stress test is more indicative of the weakness of the banks than the strength of the stress test. Most analysts thought the stress test was pretty wimpy," said Henry Blodget, president of Cherry Hill Research and CEO/Editor in Chief of Silicon Alley Insider. "If a good number of banks hadn't failed, people would have dismissed the stress tests as propaganda. So from the government's perspective, I'd say they were about right (if any more banks had failed under those wimpy assumptions, people might have been terrified.)"
Two of the institutions told by federal regulators to expand capital in order to be able to absorb additional losses are Citigroup Inc. and Bank of America Corp. The other four have not been publicly identified.
The testing was first announced February 10. The departments and agencies involved in the testing include the Treasury, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Reserve Board.Disclosures that at least six of the 19 big banks undergoing stress testing have been... more
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The FDIC took control of four more FAILED banks this weekend bringing the total this year to 29.
The failure rate has surpassed last years total of 25 all within 4 months.
The Treasury Department is due to release the results of their "Bank Stress Test" within a week.
Where will the total number of Failed banks be after that?
Will there be a run on the banks?
Please read article and decide for yourself.
If this concerns you, please check out the BANKS topic thread here on CURRENT.
Please read and discuss-The FDIC took control of four more FAILED banks this weekend bringing the total this... more
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Bringing the total SO FAR to 28 this year.
Just wait until the Treasury releases the "stress test" results....
All this while banks pop up around every corner like Starbucks.
Too much of anything can be a bad thing.
Prepare for the upcoming Dollar Crisis. Read the writing on the wall.
Please read article at link and discuss-Bringing the total SO FAR to 28 this year.
Just wait until the Treasury releases... more
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President Barack Obama will get a progress report on stress tests at the 19 biggest U.S. banks when he meets today with his economic team.
Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben S. Bernanke and Sheila Bair, chairman of the Federal Deposit Insurance Corp., will attend the session. The group also will have a “significant discussion about other aspects of the economy,” said Josh Earnest, a White House spokesman.
The exams, to conclude by the end of April, are designed to show how much extra capital banks may need to survive a deeper economic downturn. While the tests are a central element of the administration’s financial-industry rescue, both banks and regulators are wrestling with concerns over how the results will be revealed and what significance investors will put on them.
“There will be much confusion as everyone tries to decide what it all means,” said Wayne Abernathy, executive vice president at the American Bankers Association in Washington. “Our worry has been that the stress tests become a new source of stress -- real-life stress.”
One concern is that a bank’s report card could leak out during earnings conference calls, which begin later this month. That could push stock prices lower for banks that are perceived to be weak.
Just how the tests, which are still under way, are revealed also remains under debate. Officials don’t want to put undue pressure on banks that need capital, while they also aren’t inclined to keep information from the markets.
4/10 7:16 AM ET ClipsFC - WandaPresident Barack Obama will get a progress report on stress tests at the 19 biggest... more
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