You know, more so than they were before this little note?
In addition, as part of the 30-day planning process, firms will need to review their existing management and Board in order to assure that the leadership of the firm has sufficient expertise and ability to manage the risks presented by the current economic environment and maintain balance sheet capacity sufficient to continue prudent lending to meet the credit needs of the economy.
The Treasury Capital Assistance Program and the Supervisory Capital Assessment Program [Federal Reserve via clusterstock]
definitely not getting fired
lewis maybe. not pandit.
fry, motherfuckers. fry.
Lewis should have kept his mouth shut. How much do you think BAC would need to raise if he hadn’t outed Treasury and the Fed over the ML deal?
They would have gotten a $5B pass just like Citibank if Lewis had played ball.
This whole “stress test” was a massive scam. Does anyone seriously believe that Citibank has sufficient capital should unemployment hit 10%? JPM with their credit card portfolio? Really?
lewis needs to be taken out back and shot asap.
The other thing I hate about this stress test is that the government caved on this “TCE” bullshit.
When discussing the solvency of banks, why do we care about TCE vs. Tier 1? Don’t I care how much cash BAC has on hand and not really care how it falls in the capital structure?
Also, these tests must be including the TARP money as capital (otherwise how could converting TARP preferred to common satisfy the test?). Does that mean we should expect $300B of new equity raises this year so the banks can pay back TARP and still meet these enhanced capital requirements?
@4 Or Morgan Stanley’s $90+ Billion in level 3 assets toxic waste? What do they carry that shit at, on their books? 80 cents? Crap is worth 25 cents on a good day. Where does THAT capital come from? Oh, I forget, they get to mark-to-fantasy when they need to.
Total scam. These bank stocks should be in single digits and falling fast!
@4 Lewis should shut up. They guy told congress that they didn’t need TARP money, and were against MTM. I think the two arguments pretty much sum up his thoughts on the whole thing.
WFC shouldn’t be a surprise either. They were a consistent leader in sub-prime issuance. Stumph’s complaints to congress about MTM and their CA location should have provided enough clues, regardless of WB’s posturing (maybe he can get some 10% preferreds).
Guests@#7/#8…
Had the FASB not relaxed Mk to Mkt in March, what would those bank stress-test results look like?
For that matter, how would those 1Q bank profits look ?
TGFD believes that banks’ profits would have been big losses and that all of the stress tests would be big failures with big capital requirements.
TGFD just doesn’t know the magnitude.
The Guy from Delaware
@9, I’m not sure either. Seems that most loan indicies hit their lows in Jan. and have since either rebounded or stabilized.
@4 Personally know that Citi ran their internal stress test before the gov at 12% unemployment and the Dow at 5,000. What that means, I really don’t know, and I’m sure it was, like it still is, impossible to account for future writedowns / commercial real estate.
for the record, wfc’s tce would have been 2.9% vs the 3.3% they reported due to the accounting changes. let’s be clear here – the “stress” test was/is a farce. we knew that it was an exercise in bolstering public confidence in the banks. and guess what, they got it – what else could explain the awe-inspiring run the banks have had this week? tim/shelia/et. al. well played…after all the best questions are the one’s we already know the answer to (right?).
cluz: I noticed you have a major hard on for WFC. Maybe ’cause you missed the 33% rise as of late, giving back most of the gain from your recommendation to sell at $30?
@12
SO back to a short position on the banks? 10…9…8…7…
No top jobs are on the line. Who would believe that there would be someone in a firm that would be set to review their CEO and Board and then determine that they should be fired? This is a self-review, not an external review.
@13/14 – I made my money on the march 10 puts when wfc dropped in the high 7′s. that said, I do have short may put positions in FAS (which expire next week and remain in the money). I’m not long or short any individual names. the reason I harp on wfc is because the multiples don’t make sense relative to the other “better” names out there (please convince me otherwise – 2.8x tang bk vs jpm 1.6x). I know better than to fight the populist rage or love…friday should be interesting.
16 Totally different franchise than JPM, thats why. Also, focusing on multiple to tangible book is overly simplistic. Note as well that buying any March puts would have made you money, not just FAS or WFC.
@17 – I was long the wfc put, I’m short fas calls now. I realize you could have made money in both from jan to march – but even then, there were naysayers. it’s all documented in prior db posts. as far as franchises go – I would agree that wfc without wb/golden west would be better than jpm. however, with the toxic assets (aka pick-a-pay mortgages), jpm trumps buffett and his wells any day. but like I said, I have no position in either. short squeezes can be a killer (see porsche/vw)…