Who is going to do the testing? Under what conditions?
Maybe goal/jail for anyone caught cheating would be a good idea.
In my opinion the government’s dilemma over how their action will appear to the market is the expected fallout of their massive intervention. Their solution will be more government control, creation of rules and agencies, bailouts, loans, propaganda, ad infinitum. Partial government control does not work and leads to more tinkering to solve the problems their initial involvement caused. Total government control leads to impoverishment of us all through monumental misallocation of resources. The only solution is minimal government interference to begin with. Banks should pay the loans as soon as they can and refuse any more “help.”
Geithner has already rigged the game by basically allowing each bank to value the toxic assets at whatever value that makes them look good and not have to raise more money because of the ‘ponzi’ like so called ‘assets’ that may evaporate at any point. No doubt the recent wave of 1st quarter profits by the banks is a result of the new approved values that Treasury has allowed them to grade these toxic pieces of paper on their books. Geithner and Summers helped to create these derivitives and they both have made money by supporting the financial institutions running this ponzi crap shoot and now wants the taxpayer to be the final one holding the empty bag.
Let’s see: if the banks fail the stress test their stock goes down. If the banks pass the stress test their case for more gravy from Uncle Sucker goes down. What to do? The banks have already fudged accounting. Why shouldn’t they do the same with the “stress” test? Unfortunately it is not clear what is in their best interest but count on the final action being crooked.
Of course, but they mean nothing. A stress test measures a response to a real stress, not a hypothetical stress that can be fudged to give the desired result. They should not be believed (they indicate only which banks are politically connected enough to get the results they want) but will anyway. Only fools will use them to guide investment decisions.
These stress tests seem to be a waste of time. I agree with most posters who feel the tests will just be manipulated to help (once again) the banks. Meanwhile, the banks go on there merry way raising fees and interest rates and cutting back on lending.
Being one of these “too big to fail” banks is better than being the Federal government. They can print money limitlessly without any discussion or political consequence. BOA is now charging fees at all atm’s and has also started charging annual fees on accounts that never had them before.
They aren’t zombie banks they are vampire banks sucking the lifeblood out of the economy one transaction fee at a time.
BOA atm fees last year amounted to $16 billion (yes with a b ) dollars. $3 billion more than the loan reserve everyone was so in flux about several days ago.
It ought to be obvious that there is a huge predisposition to giving the banks a clean bill of health. Can you imagine anyone saying the “vast majority” of banks are going to fail?
So of course the stress tests aren’t entirely credible. That doesn’t mean they are wrong either.
As for “mark to market” – you could make the same claim about a lot of assets. The reason the banks aren’t selling the assets now isn’t because they don’t want to. Its because they can’t find any potential buyers who are willing to take the risk that they will be worth more in the future.
The banks don’t have that choice. There are three scenarios. The assets really are never worth much and they go bankrupt. The assets are never worth much, but the government bails them out buy buying them at inflated prices. The assets are worth a lot more in the future and the banks can sell them at a huge profit compared to what they would get today.
Amazingly, they have put themselves in a remarkably good position to make a lot of money if things go well. But have the government will bail them out if they don’t. Its really the same old game.
These stress tests can not be trusted and obviously the results can be manipulated (politically). They are causing the Market not to move and are providing no closure as would bankrupcy and reorg would do for these too big to fail institutions. The Govt made a mistake and does not know how to get out of it!
Juts take a look at what Mr. Dimon (the crook CEO of JPMchase) has to say on the featured article today!
I quote: “At J.P. Morgan Chase we already operated under best practices on compensation – paying a large portion in equity and rewarding people for sustainable, long-term performance.”
Wait, there’s more!
“In my whole life, I’ve never hired someone who was taking the job simply for money, not once. I wanted them to join because they wanted to build a great company over a long period of time.”
What a joke!!!
This is a clear indication this guy does not have a clue about what happens on the ranks below the executive level, where the life blood of a company really flows.
Believe me. I very familiar with JPMChase’s performance review and rewards programs!
I think investors can’t “belleve” the results of stress tests mainly because these very same short-sighted executives will be the ones providing the input that will make up those results.
The information will be as reliable as Mr. Dimon’s statements regarding merit and retention (the lack of it)!
Until there is real accountability, nothing can be believed. The banksters and traders have been given huge compensation packages on the presumption that their jobs were high risk and vulnerable and that there skills kept the system afloat. Neither of the above is true. Few of the overcompensated executives have even lost their jobs let alone pay back what they have stolen. They are not top caliber talent. They were not even good enough to keep these companies solvent.
The bank bailout and the complete lack of real accountability have destroyed confidence that the system is anything but a rigged game to enrich a few golden boys. Till a whole bunch of these guys lose their jobs and see prison time there will be no faith in the system. Till rewards start being given to work and performance over image and connections there will be no confidence in the system. Without faith and confidence the system fails.
I will definitely not believe the results of the stress tests, but then again, I am a rare breed that understands our fiat money system and the massive manipulation and corruption that surrounds it.
The bottom line is it only matters if the majority believe —- our financial system and more or less entire country is best on “hope” and “optimism”; not a strong foundation. Anytime you have a ponzi scheme like our financial system, all you have is “hope”; judging from the markets lately, there is an awful lot of hope. Combine this with an illiterate populace more concerned with watching American Idol than they are in actually educating themselves on our corrupt system, add a full serving of a corrupt media that cheerleads the markets with their own brand of “hope” (well, now that they have elected a president they like for a change), and what you end up with is a Ponzi scheme unlike any other in mans history.
Will it end well? Of course not, but try telling that to our corrupt politicians and corrupt media that refuse to report the facts out of fear they will offend someone.
I’m pretty sure if Lehman Brothers and Merrill Lynch were given a stress test at this time last year, both firms would have passed as well.
The problem is still how to value illiquid assets. Changing the mark to market rules is probably a very good idea (after all, if I’m not selling something today, what it’s worth right now is not nearly as good a measure of it’s value as what I get from holding it) however in terms of liquidity the assets are still not saleable for anything close to booked value.
It can’t be coincidence that Morgan Stanley was the first big bank to disappoint and all along they have been one of the big banks with the least exposure to subprime/toxic assets (thus having a smaller right-up in values contained in this quarter’s results).
I don’t think I can trust the results of the stress tests … unless there is a major failure to prove that they’re real (AIG and C are my favorite failure candidates).
There are big banks that are hiding a LOT of garbage off and on their books.
We need to kill all of these bailouts so that the real cleaning can begin; there are still way too many banks, especially bloated, big banks.
No more taxpayer money; let’s get back what we already put in.
regarding the comment by JB Jolibois;
If regulation is the problem, then why were the banks successful and the country prosperous under reasonable regulations for over 50 years following the depression? Why is it that once the regulations were removed there has been nothing but a series of bubbles in place of productive investment?
Saying all government involvement and regulation is bad is like saying we would be better off with no traffic laws or laws at all. It is absolutely foolish. People who repeat that garbage need to get unhooked from rush, sean, glenn and bill’s spoonfed garbage and start thinking for themselves.
If the banks really needed the bailout then their leadership is incompetent. They need to be removed. If they do not then they are lying and frauds. In that case they need jail. Or are laws against fraud and theft too much government regulation?