Stress Test Double Talk: 'Bad Is Good'

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Includes: BAC, IYF, RF, WFC, XLF
by: Tom Lindmark

The leaks continue. Reportedly, Wells Fargo needs $15 billion, Regions Financial (NYSE:RF) needs an unspecified amount of money and according to CNBC, GMAC needs $11 billion. So far it all seems to be engendering a giant yawn.

The news last night that BofA (NYSE:BAC) was short about $34 billion only caused its stock to go up 12% so far.

The spin from BofA is that they really passed the test. According to the press flacks they can sell assets, increase capital via earnings or convert their TARP convertible preferred to common equity so there’s no need for them to actually, you know raise new capital.

Presumably we’re going to get the same logic from the rest of those that fail receive less than an A+ on the stress test. It’s beyond words. Last week they were all going to pay back the TARP funds as soon as the government told them how to do it, today they’re really well capitalized because they have that TARP money to fall back on.

“When I use a word,” Humpty Dumpty said, in a rather scornful tone, “it means just what I choose it to mean - neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master - that’s all.”
Through the Looking Glass.