CHESSNOID

I read the report and I read the analysis by many different experts. I feel that the Obama administration is trying to follow in the footsteps of the Bush administration when it comes to reporting the truth. I watch both him and his administration try to spin the stories so much they become truth adverse. Then again, that is what politics is all about which is spinning the truth.

The recent stress test did seem like propoganda. These were tests where no banks could fail. They all passed before the stress tests were even given. At this point, it is hard to fool everyone. In Bush’s time, the media became cowards and refused to show anything that showed the truth on the war and anyone who spoke against it were labeled anti-American. In Obama’s time, the media does the same and avoids criticizing him or his staff on their actions because they are trying to be “race sensitive” regardless of the truth.

If you haven’t read the reports, it is broken down into 2 categories of stress economic scenarios. The first scenario is losses projected under certain conditions. The second scenario is under more stressful economic conditions based on unemployment for the year 2009. The current reality already exceeds both those forecasts which makes the reports ridiculous. We live in a country where the national unemployment rate is 9% and will continue to increase!

Yahoo:

“It’s in the interest of the financial community to send this propaganda out,” Black says. “It’s remarkable not that they do it but that it still works.”

In other words, this isn’t the first time we’ve been told “the crisis is over” and that “banks are well capitalized” – and probably won’t be the last.

The professor and former financial regulator foresees another wave of foreclosures and future bank losses of more than $2.5 trillion vs. the government’s $599 billion estimate.

Simply put, the stress tests weren’t strong enough to be considered “wimpy,” Black says. Furthermore, Fannie Mae, Freddie Mac, AIG and IndyMac were deemed to have “passed” much more stringent government stress tests before their respective failures, he notes, recalling the grim history:

* Fannie and Freddie: In July 2008, Treasury Secretary Paulson testified that Fannie and Freddie were “adequately capitalized” under the test. In August 2008: “even in [Freddie's] most severe stress tests, [show] losses … less than $5 billion.” Actual losses: 20 to 40 times greater.
* AIG: “It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those [CDS] transactions.” AIG claimed in 2008 “Using a severe stress test … losses could go as high as $900 million.”? Actual losses: 200 times greater.

* IndyMac: Sold over $200 billion of “liar’s loans.” Actual losses: 160 times greater than its tests.

* Rating Agencies: Their stress tests gave AAA ratings to toxic waste. Actual losses: more than an order of magnitude greater.

“The examinations and stress tests are shams – always precise, always farblondget,” Black claims.

So while others are celebrating the end of the crisis, ask yourself this: If the government sees up to $599 billion in additional bank losses, why are they requiring banks “only” raise $75 billion? That suggests the government thinks the banking sector is overcapitalized by $525 billion.

“Once people learn they’re being lied to, they react very badly,” Black says. “And of course this is not the first lie.”

Maybe you really can fool some of the people all of the time.

I guess for the most part, the Obama administration may not want to cause a panic. They seem afraid to tell the whole truth to the American people even though transparency was promised to us.  In different times, I think most people would believe him without question. In the times we live in, it is easy to see the current reality does not match the economy they pretend to exist. The recession will not be over next month, next quarter, or even by the end of the year.  To point out more silliness about these stress tests, the banks were allowed to negotiate the results. Really! BofA negotiated there capital requirement from $50 billion down to $35 billion.

Wall Street Journal:

When the Fed last month informed banks of its preliminary stress-test findings, executives at corporations including Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. were furious with what they viewed as the Fed’s exaggerated capital holes. A senior executive at one bank fumed that the Fed’s initial estimate was “mind-numbingly” large. 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.

The underlying cause of the recession has not been dealt with. The housing bubble that burst isn’t finished deflating. There are many more financial crises on the way.   There will be a second tsunami of foreclosures based on arm resets,  record breaking credit card losses, and increasing commercial loan defaults.  So, I think trying to show the public that these banks are doing better than they really are is a waste of time and effort.  If this were true, then we should simply stop bailing them out with taxpayer’s money.

Ron Paul’s view on the bank stress tests