Monday, May 11, 2009

The Fed Plays Softball with the Banks

Someone at the Fed didn’t get the word. This deluded individual thought the bank stress tests were about evaluating the banks’ ability to survive a further downturn in the economy.


The stress tests were part of an elaborate PR campaign to restore investor confidence by pretending that terminally ill banks are hale and hearty. According the to the weekend edition of The Wall Street Journal,

The Federal Reserve significantly scaled back the size of the capital hole facing some of the nation’s biggest banks shortly before concluding its stress tests, following two weeks of intense bargaining.

Of course they did. You can’t go around scaring investors by telling the truth. For example, the original stress test showed Citibank with a gaping $35 billion capital hole. This simply wouldn’t do, so the hole miraculously shrank to $5.5 billion.

According to the paper, “Bank of America was ‘shocked’ when it saw its initial figure, which was more than $50 billion, according to a person familiar with the negotiations.” So, the Fed obligingly reduced it to $33.9 billion.

The paper then reassures us that, “Government officials defended their handling of the stress tests, saying they were responsive to industry feedback while maintaining the tests’ rigor.”

This is like a court of law being responsive to a criminal’s feedback when it comes time to sentence him.

Apparently, the Bank’s derivative holdings were not a factor when conducting the tests. Writer Mark Whitney quotes F. William Engdahl who points out that five U.S. banks hold 96% of all US bank derivatives. These are the credit default swaps everyone is talking about.

JP Morgan Chase is sitting on $88 trillion of these babies, with Bank of America holding $38 trillion and Citibank with $32 trillion.

But, Bernanke assures us that the banks are healthy.

Of course they are. Any corpse looks healthy if you rub enough rouge into its cheeks.

--Belacqua Jones


Anonymous said...

The information here is great. I will invite my friends here.


ninest123 said...

longchamp, tiffany and co, tory burch outlet, louis vuitton, oakley sunglasses, ugg boots, polo ralph lauren outlet, kate spade outlet, christian louboutin outlet, ray ban sunglasses, nike free, michael kors, louis vuitton outlet, ray ban sunglasses, polo ralph lauren outlet, kate spade handbags, air max, nike roshe run, ray ban sunglasses, longchamp outlet, nike air max, louis vuitton, nike free, coach outlet, chanel handbags, oakley sunglasses, louboutin outlet, air jordan pas cher, nike outlet, replica watches, gucci outlet, replica watches, oakley sunglasses, louboutin pas cher, sac longchamp, prada handbags, nike air max, cheap oakley sunglasses, ugg boots, louboutin shoes, oakley sunglasses, louboutin, ralph lauren pas cher, burberry, prada outlet, uggs on sale, jordan shoes, longchamp outlet, tiffany jewelry, longchamp pas cher

ninest123 said...

ugg pas cher, pandora jewelry, canada goose uk, pandora charms, marc jacobs, swarovski crystal, juicy couture outlet, moncler, ugg,ugg australia,ugg italia, moncler, louis vuitton, thomas sabo, moncler, pandora jewelry, doudoune canada goose, pandora charms, moncler, canada goose, louis vuitton, ugg boots uk, replica watches, moncler, bottes ugg, louis vuitton, juicy couture outlet, swarovski, supra shoes, hollister, moncler outlet, canada goose outlet, sac louis vuitton pas cher, ugg,uggs,uggs canada, canada goose, canada goose outlet, louis vuitton, coach outlet, links of london, wedding dresses, moncler, canada goose, moncler, canada goose

ninest123 said...

ferragamo shoes, ghd, gucci, toms shoes, nfl jerseys, louboutin, soccer jerseys, mcm handbags, birkin bag, converse, nike air max, nike air max, chi flat iron, valentino shoes, p90x workout, mont blanc, hollister, montre pas cher, lululemon, vans shoes, north face outlet, bottega veneta, herve leger, ray ban, ralph lauren, reebok shoes, jimmy choo shoes, instyler, beats by dre, mac cosmetics, baseball bats, karen millen, wedding dresses, babyliss, oakley, soccer shoes, new balance, celine handbags, insanity workout, hollister, vans, lancel, abercrombie and fitch, hollister, asics running shoes, longchamp, timberland boots, nike roshe, north face outlet, converse outlet

ninest123 said...

true religion jeans, north face, lululemon, nike huarache, timberland, nike roshe, converse pas cher, air force, hollister pas cher, michael kors outlet, true religion jeans, hogan, hollister, ray ban uk, michael kors outlet, michael kors outlet, coach purses, vanessa bruno, vans pas cher, michael kors, nike blazer, nike free run uk, ugg boots, oakley pas cher, nike air max, coach outlet, hermes, replica handbags, new balance pas cher, true religion outlet, burberry, ralph lauren uk, sac guess, ugg boots, nike trainers, michael kors outlet, abercrombie and fitch, true religion jeans, nike air max, ray ban pas cher, michael kors, michael kors, burberry outlet online, lacoste pas cher, mulberry, michael kors, north face, nike air max, michael kors outlet, tn pas cher