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Fed to banks: F. F. F. F. F. F. F. F. F. And ..... F.

Discussion in 'Sports and News' started by Football_Bat, May 5, 2009.

  1. Football_Bat

    Football_Bat Well-Known Member

    That's 10 F's out of 19 on the government stress test.


    Time to pay a visit to the Bank of Sealy.

    Guess we're F'd.
  2. The Big Ragu

    The Big Ragu Moderator Staff Member

    These "stress tests" are such a farce. There isn't anything scientific about it and they won't release their methodology, so it could be a bunch of third graders sitting around a table making up capital requirements with crayons.

    Even if there was any real methodology to it, they can't value a good chunk of the assets on the books of these banks (why the Feds likely way overpaid for the assets they have bought), so they could essentially make the results of their rigged tests say whatever they wanted them to say. They had three goals: 1) Make the case that the money they have already poured in was well spent (surprise!), 2) Make it sound just bad enough so that if they want to feed more money in later on, they have a rationale, and 3) At the same time, make the case that as bad as things are, the banks are healthy enough to survive anything. Don't panic! All is well!

    No surprise, that is exactly what they did.

    If they want anyone to take their "stress test" seriously, why won't they release their methodology? Why should anyone believe that their "results" are nothing more than Tim Geithner and a few of his buddies sitting over a pizza and a case of beer trying to manage things for political, not economic, reasons? Also, if increasing lending is their primary motivation, requiring certain banks to raise capital levels is going to have the opposite effect. They won't ever actually say that, though.
  3. Inky_Wretch

    Inky_Wretch Well-Known Member

    Is it safer to have your money in locally-owned banks, instead of national corporations?
  4. RickStain

    RickStain Well-Known Member

    If we ever get to the point where money in any U.S. bank isn't safe, you are better off with ammo and cans of beans.
  5. andyouare?

    andyouare? Guest

    Remain calm. All is well.

    Well that's a relief.
  6. RickStain

    RickStain Well-Known Member

    Well, he's probably right. It is stabilizing, and historically we should be pretty close to the recovery period.

    Unfortunately, jobs will be the last thing to come.
  7. andyouare?

    andyouare? Guest

    That's mentioned in the story: credit will continue to be tight and unemployment will probably get worse before things improve. We shall see.
  8. Football_Bat

    Football_Bat Well-Known Member

    I'd say let the lot of 'em fail, except for two things:

    • If even some of them fail, the FDIC, as I've said before, will just throw up its hands and cry uncle. There's no way it can cover all the assets in these failed banks to the insured amount, and everyone with money in these banks loses every red cent.

    • The credit default swaps that get cashed in when these banks collapse would suck many times more capital out of the economy than just the net worth of the bank itself.
  9. NoOneLikesUs

    NoOneLikesUs Active Member

    It might be slowly getting to that point without the feared potential big bank failures.

    The Silverton Bank failure in Atlanta on Friday was extremely underplayed. It was the biggest bank failure this year ($4.1 billion in assets and $3.3 billion deposits from 1,400 client banks in 44 states) and many are saying this one going down will lead to many others following in its footsteps.

    I'm no expert on any of this, but I've read where some recent failed banks are not drawing any interest from potential buyers, so the FDIC is having to hand the cash over to depositors - something it absolute dreads doing.
  10. RickStain

    RickStain Well-Known Member

    We are nowhere near the point of the FDIC giving up. Not even within a lightyear of it.

    We'll inflate the everloving heck out of our currency before we ever, ever let that happen.
  11. poindexter

    poindexter Well-Known Member

    The first quarter's unemployment rate of 8.1% is higher than the regulators' stress test "worst case" scenario of 7.9% for this same period.

    Yeah, these stress tests are awesome.
  12. Brooklyn Bridge

    Brooklyn Bridge Active Member

    Just for your viewing pleasure.


    That's a lot of banks.

    One of the problems here is that even if the big banks wanted to spin off some of their bad debt, there are no potential buyers. As long as the federal government is there to back it up, no one wants to be the first one. This is also probably a move to get banks out of the derivitive business and become more of a regular credit lender. (Thanks to morning joe for that b/c I really didn't know all that)
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