User 305589

Stress Tests Were Definitely Stressful Enough

Tom, I have high respect for your ability to analyze individual banks and their balance sheets and earnings powers. But your macro judgements are, way off base, I dare to say.
First, unemployment. It is already higher than the Fed's assumptions and that is by already incorporating lots of bullsh... by the BLS. can you spell Birt-Death-model? the latter assumes that thousands of jobs were created over the past weeks in - finance, construction, travel/leisure. Sure that really sounds credible, doesn't it? So the'green shoots' may be wherever they want, but they certainly are not in the unembployment numbers.
Second, you are right that unemployment numbers alone are not enought o forecast banks' stresses. Still, i think you are looking out at the wrong side. Since households AND corporations are still leveraged at record levels, odds are very high that banks will end up with much higher loan defaults than ion former recessionary cycles.
Third, that being said, banks have been invited by Obama, geithner and the Federal reserve scamsters to offload to the taxpayer whatever toxic assets they held. So yes, this will go a long way in limiting losses - to the banks. But they will at one point show up at the Fed's and the govt.'s balance sheet. This in turn will imply higher financing needs, and/or higher taxes and/or lowered public spending - all of which is going to lead to another dip down into another recession. poof! go your and the Fed's stress test assumptions.