Fed Orders New Stress Tests

One of the things the Congressional Oversight Panel recommended the other day was new stress tests for banks, given the mounting evidence that botched securitization may make them insolvent (okay — that last bit is my shorthand).

Today, the Fed ordered up those stress tests.

The Fed, in guidance issued today, said all 19 banks must submit capital plans by early next year showing their ability to absorb losses under a set of conditions to be determined by the central bank. The request is part of the Fed’s effort to step up supervision at the nation’s largest financial firms.

While new stress tests are a no-brainer — at some point we’re all going to have to admit that Bank of America is insolvent and should be wound down — I’ve got zero confidence these new stress tests will be anything different than the kabuki stress tests the banks had in the last go-around: that is, a “test” designed to ensure everyone passes.

  1. BoxTurtle says:

    I can’t wait to see them design a stress test that BofA will pass AND will be defensable anywhere but Faux.

    Let’s see:

    1) We didn’t consider 2nd mortgages in this test because we believe we’ll be able to get the data we need from first mortgage information.

    2) We didn’t consider pending lawsuit in this stress test because lawsuits are extraordanary events and this is simply to determine base cash flow.

    3) We didn’t consider any assets that could be covered by TARP, as the impacts will be contained by TARP.

    4) We didn’t consider ANYTHING posted at Emptywheel because Marcy is a DFH who says “blowjob” on national TV.

    Boxturtle (So, in conclusion: Almost Everything is fine and the almost can be fixed by a tax cut)

    • bobschacht says:

      I trust Sheila Bair a whole lot more than I’d trust Geithner or Bernanke. After all, with Geithner and Bernanke, no one ever fails, regardless of the magnitude of their misdeeds. But Bair has put hundreds of banks that have failed on her chopping block. With Bair, if you fail, you do not pass Go, you do not collect $200 [million]. You lose your job. With Geithner & Bernanke, if you fail, you are allowed to pass Go, and you’re allowed to collect fat bonuses, and you keep your job.
      …And IIRC, she’s a Republican appointee.

      Bob in AZ

      • Fractal says:

        Bair has been head of the FDIC since Shrub appointed her chairperson in 2006, according to the New York Times. Same NYT article from August 2008 credited her with warning very early that housing market would implode because of flood of low quality mortgage loans. Article quoted her saying two years ago that only solution was to adjust loans to keep borrowers in their homes.

  2. Mauimom says:

    But, but, won’t pixie-dusting the MERS docs make everything okay?

    I expect to hear a lot of THAT justification floating around.

    Cue the op-eds in the WaPoo, NYT, etc.

  3. Fractal says:

    Decent AP story on CNBC says foreclosure-fraud class actions are piling up against major banks. Class actions are gonna steam ahead regardless of what the 50 state AGs do as a result of their fake “investigation.” Also on CNBC, Reuters had advance look at prepared testimony by Ally for tomorrow’s House Financial Affairs Committee hearing in which Ally admits what we already know, that its foreclosure filings are “flawed,” but denies actually foreclosing with those fraudulent documents against anybody “who was not in default.” Liars.

  4. Fractal says:

    Very full schedule for tomorrow’s hearing of the Housing and Community Opportunity subcommittee of House Committee on Financial Services.

    Here are the lame-duck House members who are holding tomorrow’s hearing (many will be back next year):


    Rep. Maxine Waters (CA), Chair
    Rep. Nydia Velázquez (NY)
    Rep. Stephen F. Lynch (MA)
    Rep. Emanuel Cleaver (MO)
    Rep. Al Green (TX)
    Rep. William Lacy Clay (MO)
    Rep. Keith Ellison (MN)
    Rep. Joe Donnelly (IN)
    Rep. Michael E. Capuano (MA)
    Rep. Paul Kanjorski (PA)
    Rep. Luis V. Gutierrez (IL)
    Rep. Steve Driehaus (OH)
    Rep. Mary Jo Kilroy (OH)
    Rep. Jim Himes (CT)
    Rep. Dan Maffei (NY)


    Rep. Shelley Moore Capito (WV), Ranking Member
    Rep. Thaddeus McCotter (MI)
    Rep. Judy Biggert (IL)
    Rep. Gary G. Miller (CA)
    Rep. Randy Neugebauer (TX)
    Rep. Walter B. Jones (NC)
    Rep. Adam Putnam (FL)
    Rep. Kenny Marchant (TX)
    Rep. Lynn Jenkins (KS)
    Rep. Christopher Lee (NY)