Ok, this is a skit from SNL, but it underlines the public reaction to this farce we are calling the stress tests. Today we are starting to see the secondary offerings from banks. Apparently, investors would rather dilute the stock than have government involvement. I get that, but dilution and bad management is not a bet I want to place. Still short and hating it.
Ok, I know I have been hard on banks, but just read this piece below from the Wall Street Journal.
One question mark hanging over the tests is whether they will be perceived as tough enough. From the start, some economists and bank analysts argued that the Fed’s worst-case economic scenario was overly rosy. Since the Fed informed banks of the preliminary test results, the government appears to have softened somewhat as banks pushed back.
Among other things, regulators accepted banks’ bullish arguments about their profit outlooks. The Fed initially planned to use banks’ lackluster 2008 revenues as a jumping-off point to predict future incomes, according to people familiar with the matter. But many big banks logged robust first-quarter profits and argued that should serve as the “run rate” for the stress-test period.
Any bank needing more capital will have until June 8 to develop a plan and Nov. 9 to implement it. The banks must also review their management and assure regulators that leadership has “sufficient expertise and ability,” to manage through the current environment.
We get right into into it. Check out the page on CNBC here. Bottom line is that we are not out of the woods yet and price momentum means nothing to another half million out of a job. We are entering the ‘dry’ season that goes from May through October. Not a great time to jump in. . . But, Scott was a great analyst to be interviewed with. I disagree with his points, but respect the work he puts into it.
