For a quick lesson in hypocrisy and smoke and mirrors all tied into one, how about the test that no banks can fail, and that, in any case, is based on such lax standards and assumptions that even the institution passing with high honors should give investors no comfort whatsoever? We refer, of course, to the much touted (by the Administration in any event) "stress tests," the economic assumptions of which have already been overtaken by current conditions.
Really, it is insulting to the public to think that their confidence will be restored by some arbitrary "stress test." We suppose that we are supposed to draw from our experience with federal standards like those "regulating" "no trans-fats" and "no calorie sweetener" claims to feel certain that the government knows what it is doing and happily go long all financial institution (since none will fail the "stress test.")
Regulators say all 19 banks undergoing the exams will pass them. Indeed, they say this is a test that a bank simply will not fail: if the examiners determine that a bank needs "exceptional assistance," the government, that is, taxpayers, will provide it.
But the tests, which are expected to be completed by the end of this month, are being conducted out of public view. Federal law prohibits the unauthorized disclosure of the results of any bank examination, including the stress tests. Some investors wonder if the new tests are rigorous enough, given the potential problems lurking inside the banking industry.
We are shocked, shocked, to discover that no banks are failing the test.
Banks Holding Up in Tests, but May Still Need Aid [The New York Times]