The federal government should repeat its stress tests of the nation's largest banks if its assumptions about the severity of the economic downturn prove too rosy, according to a congressional oversight report to be released today.
The Congressional Oversight Panel, which oversees the $700 billion government bailout of the financial industry, generally praised the bank evaluations, which assessed the firms' financial health, and lauded regulators for using a reasonable model to conduct the tests.
But the panel, headed by Harvard Law School professor Elizabeth Warren, noted that the stress tests assumed an average unemployment rate of 8.9 percent this year under the worst-case scenario. The unemployment rate for last month, however, climbed to 9.4 percent, meaning the assumptions by regulators might have been too optimistic.
http://www.washingtonpost.com/...
Now I hope and pray Bonddad and Phoenix Woman are right. I really do.
But reality is reality and blaming Meteor Blades for having an alternate assessment, especially when MB has emphatically denied that his assessment was aimed at Bonddad, is actually just pathetic.
My take on the economy is: add to the above blockquote the fact that 10% unemployment is supposed to necessitate banks raising more capital, IIRC, per the stress test methodology.
If the stock market reacts like I think it will to this news, alongside a worsening housing market (I have a house so I certainly don't want this!!), the banks won't be able to raise the money. The government may have to bail out Shitigroup and Bank of America (literally) yet again in that scenario...
So, I think people are calling Bonddad out on cheerleading instead of seriously analyzing the economy, i.e. reality-based assessment. Yes the charts show a recovery from the almost-collapse but that doesn't mean we won't see a plateauing, maybe to the extent of Japan's 10-year stagflation.
When the economy hits 10% unemployment, alarms are going to go off and the GM/ Chrysler bankruptcy should easily push up past 10%. Some say that 12% or more is likely... adding in the real unemployment rate (part timers, etc.), we're starting to look Depressed already.