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Surprise! All Banks Pass Stress Test (Except Ally)
In a stunning headline-making moment of clarity, it appears that all the major financials that the Fed monitors (except GMAC Ally) will survive a cataclysmic, Lehman-like moment based on their self-determined analytics of their deeply illiquid off-balance-sheet assets (and a comprehensive understanding of the co-dependence of all those assets). As Bloomberg notes,
- *TESTS ASSUME HYPOTHETICAL SCENARIOS FOR 9 QTRS ENDING 4Q 2014
- *FED SAYS 18 BANKS PROJECTED LOSSES WOULD BE $462B UNDER TEST
- *FED SEES 17 BANKS' TIER 1 COMMON RATIO ABOVE 5% IN WORST CASE
- *GMAC ALLY ONLY STRESS-TESTED BANK SEEN WITH TIER 1 COMMON BELOW 5%
- *TESTS SCENARIO ASSUMES EQUITY PRICES DROP MORE THAN 50%
- *TESTS SCENARIO ASSUMES HOUSING PRICES DECLINE MORE THAN 20%
Is it any wonder that Government Motors wanted to IPO its GMAC/Ally business recently - with a 1.5% stressed Tier 1 ratio.
And another summary table:
And in chart format:
and for fun - only $48.4bn total losses from trading and countperty
exposure in a Lehman-like stress event for JPM and Goldman...
PR From The Fed:
The nation's largest bank holding companies have continued to improve their ability to withstand an extremely adverse hypothetical economic scenario and are collectively in a much stronger capital position than before the financial crisis, according to the summary results of bank stress tests announced by the Federal Reserve on Thursday.
Reflecting the severity of the stress scenario--which includes a peak unemployment rate of 12.1 percent, a drop in equity prices of more than 50 percent, a decline in housing prices of more than 20 percent, and a sharp market shock for the largest trading firms--projected losses at the 18 bank holding companies would total $462 billion during the nine quarters of the hypothetical stress scenario. The aggregate tier 1 common capital ratio, which compares high-quality capital to risk-weighted assets, would fall from an actual 11.1 percent in the third quarter of 2012 to 7.7 percent in the fourth quarter of 2014 in the hypothetical stress scenario.
The Federal Reserve's stress scenario estimates are the outcome of deliberately stringent and conservative assessments under hypothetical, adverse economic conditions and the results are not forecasts or expected outcomes.
Despite the large hypothetical declines, the aggregate post-stress capital ratio exceeds the actual aggregate tier 1 common ratio for the 18 firms of approximately 5.6 percent at the end of 2008, prior to the government stress tests conducted in the midst of the financial crisis in early 2009. This is the third round of stress tests led by the Federal Reserve since the tests in 2009, but is the first year that the Federal Reserve has conducted stress tests pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Federal Reserve's implementing regulations.
"The stress tests are a tool to gauge the resiliency of the financial sector," Federal Reserve Governor Daniel K. Tarullo said. "Significant increases in both the quality and quantity of bank capital during the past four years help ensure that banks can continue to lend to consumers and businesses, even in times of economic difficulty."
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LOL 4 the QED
haha was just explaining to a socialist classmate how these self-reported tests work and this headline made my job much easier
*FED SAYS 18 BANKS PROJECTED LOSSES WOULD BE $462B UNDER TEST
This just in...
18 Banks say taxpayer losses are just a little under half a trillion at the moment...
I believe all the banks but Ally also passed the "Armageddon scenario", where the oceans blow up, the sky falls, and the Dow Jones drops over 35 points.
Phew - that was close!
Wow! Look into the magical risk pool...we look great!
FASB approves more mark-to-market flexibility
Responding to pressure applied by lawmakers on Capitol Hill, the Financial Accounting Standards Board on Thursday voted unanimously to give auditors more flexibility in valuing illiquid mortgage assets that may have long-term value.
Seeking to resolve this situation, FASB's new guidance allows banks and their auditors to use "significant judgment" when valuing the illiquid assets such as mortgage securities.
http://articles.marketwatch.com/2009-04-02/news/30761323_1_fasb-chairman-robert-herz-illiquid-securities-financial-accounting-standards-board
The new guidance, which is expected to boost bank operating profits when they report first quarter results later this month, alters so called mark-to-market rules, which have required banks and other corporations to assign a value to an asset, such as mortgage securities, credit-card debt or student-loan investments, based on the current market price for either the security or a similar asset.
Banks have complained that they have viable assets with strong cash flows that can't be sold because there is no market for them.
Needs moar Skittle-shittin'!!!
Who cares, we all know those books are cooked anyway ... keep calm and carry on ...
The one parameter that was not mentioned but implied in establishing the preconditions for the stress scenario was that the letters d, e, f, a, u, l and t are removed from the alphabet.
.
...and don't forget that all of the banks, including Ally, received participation trophies.
In other news, Chavez is going full-Lenin.
http://apnews.myway.com//article/20130307/DA4SGCCG0.html
Viva La Zombie Chavez!
Will he smell of sulphur or embalming fluid?
But But But
How can stocks ever drop 50% when they can not even drop 0.5% intraday?
And housing as tey say is already recovering?
"All Banks Pass Stress Test (Except Ally)"
I thought Friday humour was tomorrow..?
That will certainly end well.
No shit. The "new" FASB rules, even better than the old FASB "rules," where banks are about to receive EVEN MORE LUDICROUS leeway to mark their assets to unicornium-valuations:
Proposal Gives Banks More Freedom to Value Assets
Published: February 14, 2013
Long live the Ponzi. Pass the HorseMcNuggets & Escolar tartare.
I'm shocked that the noble profession of public accounting has been criminalized !!
FASB: Fuck America, Serve Banks
so those crap MBS the fed is buying can be priced higher ya knowr; pretty fuckin' slick way to provide more (i)liquidity by my estimates. sounds like a "shitty deal" for us slaves.
I call BULLSHIT!
Commercial real estate is overvalued by a factor of two to five because they've used whores like Cushman Wakefield and CBRE who have the analytical ability Bernake. I've seen nothing but nonsensical crap come from these girls in red. Will overvalue (blow you) for a fee.
I'll label this as the 'ekm' moment
~~~
ht ~ Minsky
Electrolytes. It's what banks crave.
Yup yup, Idiocracy in America is not decades ahead, it's already here because 99.99% percent of Americans, don't understand, don't know and don't care!
I CARE!... but that's prolly why I have no friends & even my family hates me...
Rest easy , like last time they all DIE underground.
All of them. Time for a reset. Goodbye to bad trash. I'm now looking at alphabet agencies because of askance...they best check in. Or they get their children hunting.
you all have some juice to use otherwise to illustrate 'place'. Mind and will. Use it monkey's.
I view these stress tests as similar to the pump that's been taking place in the market. If they can't coerce people to dump money into stocks by constantly propping up the market, they want them to be reassured that the banks are a completely "safe" place to store what meager savings they have, and they accomplish that task by having "stress tests" that the banks pass with flying colors.
None of this does a thing to instill confidence in me.
Yeah.
Banks "pass" but they're stressing the shit out of everyone else.
There is not enough bullshit spray for this test.
TEST SCENARIO doesn't include MARGIN CALL OF SEVERAL BILLIONS ON THEIR CDS if a major bank goes under...
Nobody gets called on CDSes, just ask AIG!
Just let the DTCC figure it out for you
D used to mean Default
Ben Almighty...what say thee
Can we end the Fed then? What do we need a lender of last resort for? Or is it the lender of first resort? I am.... confundido!
OH so on top of this weeks near 40 S&P points added, we'll get another 15 tomorrow, throwing in the certain full-retard jobs# blowout festival first thing in the morning!
The whisper number is 170 million new jobs added (based on seasonal adjustment since we know that 170 million were lost due to sequester).
Muh-muh-muh-muh BRAIN'S not too gu gu gu gud.....
Simple Jack (2009) Full Extended Trailer - Official/High Quality - YouTube
The collective IQ of this country will shoot up 170 points once Maxine Waters kicks the bucket.
They must have forgotten the test for rise in interest rates.
Well, that would just be plain dumb. That's a market phenomenon.
Everybody knows the market is dead, dead, dead.
Everybody still rocks.
Thank God, I was worried there would be a problem if markets crashed. Feel much better now. So lets see, should I buy BAC or C....or both.
What a fucking circus we got ourselves into. Beyond words.
Um, why do we need stress tests any more, now that the Fed can print unlimited money and give to banks?
Oh, right, I forgot that this is just a trigger for stock pumping whores of wall streets back room operations.
Assumption: US Treasury holdings have a 0% risk weight.
50% equity drop, 20% housing value decline, and banks STILL pass with flying carpets! WOW they're all teflon coated titanuim banks truly!
Nice TPB reference, +1
.
...and they've Got What Plants Crave. They've Got Tungsten!
Unusual that a privately held bank, with a majority of international shareholders, would be in charge of administering a stress test of U.S. banks. Amazing that this body grew to such a high level of influence. More like criminal.
If they would have gave that kid a fucking ice cream cone maybe they would have passed.
That is the official line.. the reality is
"Ally" - gawd I laughed so hard when I first heard that name-change. This depression does have it's amusing moments.
'Ally' name must have focus-grouped well....or it's an anagram for 'Ya'll be footin the bill'
Its American for Dexia
Besides, how can they become insolvent when they own all of those brand new repo'd cars?
In Idiocracy, the restaurant Fuddruckers had become Buttfuckers at some point in the future.
I think eventually all banks will be called "Assrapers."
According to the bank's website, "Ally Bank named 'Best Online Bank' For Second Straight Year." WTF. It is apparent they can't even get the capitalization scheme right both in typography and finances.
It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
-Henry Ford-
In America there are no people, just a few wolves and lots of sheep.
I don't think it will take 9Q for them to go under once a derivatives shit storm tsunami hits along with the subsequent domino effect.
..This is the story 'bout Bald-Headed Ben
(Dong work for Yuda, Dong, Dong)
He talks a lot 'n it's usually wrong
(Dong work for Yuda, Dong, Dong)
He said Dong was Wong,
'N Wong was Kong
'N Dong work for Yuda,
'N Ben was wrong
Sorry, Ben, sorry, better try it again
(Dong work for Yuda, Dong, Dong)
Sorry, Ben, sorry, better try it again
He said Dong was Wong
And Wong was Kong
And Dong was Gong
'N Ben was wrong
Ben's got a sausage, yeah man!
Ben's got a sausage, yeah man!
Ben's got a sausage that will make you fart
Ben's got a sausage that will break your heart
Make you fart and break your heart
Don't bend over if you are smart...
Zappa is one of my heroes.
A sinister little midget with a bucket and a mop
Where the blood goes down the drain.
The Torture Never Stops
no synthetic derivatives here...none whatsoever....no off the books stuff either...all is good when you have Ben and now Eric behind you CYA....
O.K., they did see that coming.
Oh Lucy, Im confused ... Please splain'
That's quite a relief, the worry had me quite constipated -- although I still feel the Fed's full of shit.
This means that Ally (GMAC) is at the head of the line to get a bail out in the next crash.
Just think where the level of channel stuffing would be without them.
I think the UAW pension fund should pick up the slack.
What is good for General Motors is GOOD for America!
Banks still do not have to mark their underwater mortgages and foreclosed houses 'to market' so it is pretty easy to pass your stress test when you can pull valuations out of thin air. And would an equity plunge of even 25%, leveraged up 30-to-1 really not cause any stress?
Yea who are they trying to fool? If the 'markets' dropped even 10% from here they'd all shit their pants.
absolutely! the balance sheets are complete works of fiction...this from a CPA... It's amazing that the AICPA can't get a set of balls and change the rules to reflect reality. I don't know how reporting non performing assets at 100% of the loan amount circa 2007 doesn't qualify as financial fraud...
In a sick twisted way it is probably fair treatment....since the Fed/Govt will buy or guarantee any shit these so-called banks hold.
Kind of like the government saying it will buy any 2003 Dodge minivan for $75,000. I guess I would carry that asset at $75,000.
Voila, I pass the stress test.
Easy to withstand a crisis when the Fed will print you all the money you need.
Sounds like Uncle Ben is prepping the masses for the bubble illusory wealth (that everyone thinks is real muscle and not some steroid meatball head, water balloon bloated muscle) deleveraging reality kicks in that is coming.
Also the other thing we can infer is they probably plan to try to unwind the QE to infinity and beyond over 2 1/4 years. Hence the stress test being 9Q. Also this seems to be an admission (cry for help maybe) the FED has inflated (manipulated) the equities market by at least 50% and housing market by at least 20% due to all their money printing.
Every time I read something like this I pop my Scarface DVD(directors cut) in the player, fast forward to the end, and imagine Tony Montana is really John Corzine.
That's what they get for not giving me a real pony or a second ice cream cone!
The FED says...
You mean the same Fed that didn't see a housing bubble even in 2008?
You mean the same Fed that says it's QE program is only tweaking interest rates a smidge?
oh, ok.
Are these the same banks that receive the equivalent of $82 billion in taxpayer subsidies which permits them to be "profitable" and pay out massive bonuses to their employees?
Bernanke response:
"Uh, er, well, economic models, risk, er, mandate, complexity, er, um...I have already addressed this issue"
of course, how else can they attract or keep this kind of "talent"?
How 'bout a li'l history to focus the mind?
http://www.youtube.com/watch?v=RJpLMvgUXe8&feature=player_embedded
Banks+Insurance Cos. = Too Big To Prosecute. (according to our pussy of an Attorney General) Bring back Glass Stegall. Put some sanity back into banking! That will force "helo pad Bernanke" to raise rates yesterday!
It will take hell on earth to make that happen now.
Wishful Thinking. It's amazing how fast people forget. History repeats because people always wait until the last minute.
Wow, 12.1% unemployment? Already here and then some.
In 2012 my home lost 25% of its value and another 10% so far in 2013.
I'd say the worst case stress test scenario is already here. All we need is that pesky 50% drop in stocks.
Stop using real facts....our government has all you need.
If you continue to use these un-sanctioned stats, then you will be deemed a combatant and subject to droning.
I am not rich.I fully trust what FED says.All i can do is to send 1 small gift to Bernank.Cake from Ikea.
how about a used urinal deodorizer cake?
I have not been sent to the Gulag yet but starting to understand what it was like to live in the Soviet Union.
I still go back to what my Dad said about the depression....
The leaders kept on blaming everthing on a "lack of confidence"....and as a result never addressed the real, obvious problems. It required a world war that destroyed Britain and Germany to wipe the slate clean.
I have plenty of confidence — that we'll follow the same gameplan.
but what about a 51% and a 21% drop......its what they DO NOT say , that you need to be very afraid of
So if I'm reading this right, the next bailout will have a minimum price tag of $462B and Ally gets the Lehman treatment.
Please add into the assumptions a 50% loss in all 5+ year gov debt, a 80% loss in HY and a 70% loss in munis and for fun a 20% loss in grade "A" corporates.
Then let me know what the ratios are.
Thanks
wonder if the FED would pass the stress test?
With something like Arthur Andersen or Promontory conducting the testing, they'd be sure to pass with flying colors! Or better yet, they could perform their own stress test.
So in the latest round of musical chairs aboard the Titanic, all the other banksters get a chair while Ally is left standing?
tomorrows employment numbers are going to mean shit.
if we see improvement, the dow will hit 15000 tomm.
if we see disappointment, the dow will go to 16000 tomm because that will mean longer qe.
either way, we all know in this big fucking scam of a market that is becoming so obvious to even the biggest naysayers, its going to be a green day, and i am going to be fucking pissed.
the s&p will easily surpass its record tomm,
when the fuck will the markets sell off? it makes no sense, even after we hit new highs, it seems like the market is tired but it just wont go red. i forgot what the color red looks like.
fuck all these fucking banks, i hope they are all beyond bankrupt like lehman and bear stearns were and do not get bailed out. fuck u bernanke and obama u fucking bastards
Having been through a couple of these endless Fed monetary masterbations, you should relax, get long and have a drink. Eventually, maybe even quickly, it will get to aggregious levels with rampant speculation times 10. The Fed will keep the pedal to the metal the entire time, patting themselves on the back and enjoying all the Man of Year awards and Nobel Prizes.
Then, one day, you will see a dog drive by in a Lamborghini. Not an ugly chick, but an actual dog driving an Italian sportscar and getting a blow job from Kate Upton as he drives down the street. At that you point, you must sell and go short. That is the sign. It is always the sign.
yes nothing can possibly go wrong with 700 trillion in derivatives. remember folks gross can never be net. ever
And everyone get's a triple star.
The only stress-test the bank regulators created for the bankers was when the bank president was asked about a personal lap dance in front of rest of board members at the bank regulator's strip club.
Ally (ahhemm, DiTech, cough) didn't pass? Come on Bernanke, why haven't you doubled monthly QE yet?
Ally opposed attending the bank regulator's strip club for moral reasons.
And here we go. The key phase: a bank SELF assessment. NOT even funny......
Senario: One of the self assessed banks get caught up loosing a few billion. They have to get bailed out by the Feds and they get a fine or MAYBE a slap on the hand. Now don't do this again........
Like I've noted before, stress tests are like new age hippie schools, nobody fails to prevent their feelings being hurt.
Banks, go fuck yourselves.
I think the political aspect of this goes unnoticed.
TESTS SCENARIO ASSUMES EQUITY PRICES DROP MORE THAN 50%
I've stated before this is probably a tactic admission how much the FED has inflated the equities market. When they finally try to normalize monetary policy and bleed all that excess out you are probably looking at about 50% inflation that is being hidden in the stock market finally hitting the street. That means federal deficit should be halved by about the same. It is going to be fun to see how they rig the CPI and other inflation measures to hide it while claiming they are cutting spending at the same time.
Deutsche gonna blow?