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Fed 2015 "Stress Test" Results: 31 Out Of 31 Pass, Mission Accomplished
Four months ago, in another failed attempt to boost confidence in the Eurozone and stimulate lending (failed because three months later the ECB finally launched its own QE), the ECB conducted its latest stress test, which as we explicitly pointed out was an utter joke as even its "worst-case" scenario did not simulate a deflationary scenario. Two months later Europe was in outright deflation.
It was initially unclear just how comparably laughable the Fed's own stress test assumptions were, but refuting rumors that Deutsche and Santander would fail the Fed's stress test (perhaps because former FDIC head and current Santander head Sheila Bair wasn't too happy about her bank being one of the failed ones), moments ago the Fed released the results of the 2015 Fed stress test, and.... it seems there was no need to provide a sacrificial lamb as with stocks at record highs. In fact everything is awesome!
- FED STRESS TEST SHOWS ALL 31 BANKS EXCEED MINIMUM REQUIREMENTS
As we have previously explained, of course, the results are completely meaningless, as the Fed neither then, nor now, has any methodology for how to calculate capital in case of the same kind of counterparty failure chain as happened during Lehman, and when no amount of capital would have been sufficient to preserve the financial sector. Like we said: theatrical spectacle. But at least everyone's confidence has been boosted. So Buy stawks, and build your paper wealth!
So to summarize the history of US bank "failure":
- 2013 Fails - Citi, SunTRust, MetLife
- 2014 Fails - Zions
- 2015 Fails - None, nada, zip...
US Financial stocks have been considerably more exuberant ahead of this report than financial credit...
We will see how they react to these results. Some more details from the WSJ:
... all 31 of the biggest U.S. banks had enough capital to continue lending during a hypothetical economic shock where corporate debt markets deteriorate, unemployment hits 10% and housing and stock prices plunge. The exams are designed to ensure large banks can withstand severe losses during times of market turmoil without a taxpayer bailout.
It was the first time since the tests began in 2009 that all banks maintained capital levels above what the Fed views as a minimum allowance. The banks will need to maintain those minimum capital levels to pass the second round of stress tests on Wednesday, which will determine whether a firm can return money to shareholders. Two banks, Goldman Sachs Group Inc. and Zions Bancorp , had certain capital ratios that came close to the Fed’s minimum, which could limit shareholder payouts.
The overall results buttress regulators’ view that the financial system is safer than before the Great Recession, in large part because of loss-absorbing capital built up for the annual stress test exercise. The Fed said the 31 banks’ aggregate Tier 1 common capital ratio, which shows high-quality capital as a percentage of risk-weighted assets, dropped as low as 8.2% under the stressful scenario, well above the 5.5% level measured in early 2009 and the 5% level the Fed considers a minimum allowance.
The bottom line: bank shareholders can recoup some more capital from their "perfectly solvent" banks. As a reminder, it was almost exactly 6 years ago when discussing just what the prerogatives of the Fed were when it proposed enacting a non-QE plan of saving the financial system:
irst, the lack of details will create some uncertainty and concern, particularly because there’s not a great deal said about the “problem children,” the BAC and Citi. Secondly, I think the markets will be disappointed in the following sense: As I will describe, this is a real truth-telling kind of plan. It’s fundamentalist. It’s not about giving the banks a break. It’s not about using accounting principles to give them backdoor capital. It’s very much market-oriented and “tough love.” And I think we all will like that. I like that. But the banks’ shareholders aren’t going to be thrilled about it.
Back then, the bank shareholders made it quite clear that they want QE, and they got QE. They have been thrilled ever since.
* * *
A reminder of what last year's stress test scenarios looked like... in the baseline stress test scenario, the Dow Jones "plunges" to 11.4K in Q3 2014, and then somehow surges back to all time highs by Q4 2016! Does the Fed understand the word Stress?
And here is this year's oh so stressful scenarios... wonderfully mean-reverting and no contagion and Dow 20,000...
The Fed's description of the "Severely Adverse" stress test:
The severely adverse scenario for the United States is characterized by a deep and prolonged recession in which the unemployment rate increases by 4 percentage points from its level in the third quarter of 2014, peaking at 10 percent in the middle of 2016. By the end of 2015, the level of real GDP is approximately 4.5 percent lower than its level in the third quarter of 2014; it begins to recover thereafter. Despite this decline in real activity, higher oil prices cause the annualized rate of change in the Consumer Price Index (CPI) to reach 4.3 percent in the near term, before subsequently falling back.
In response to this economic contraction—and despite the higher near-term path of CPI inflation— short-term interest rates remain near zero through 2017; long-term Treasury yields drop to 1 percent in the fourth quarter of 2014 and then edge up slowly over the remainder of the scenario period. Consistent with these developments, asset prices contract sharply in the scenario. Driven by an assumed decline in U.S. corporate credit quality, spreads on investment-grade corporate bonds jump from about 170 basis points to 500 basis points at their peak.
Equity prices fall approximately 60 percent from the third quarter of 2014 through the fourth quarter of 2015, and equity market volatility increases sharply. House prices decline approximately 25 percent during the scenario period relative to their level in the third quarter of 2014.
The international component of the severely adverse scenario features severe recessions in the euro area, the United Kingdom, and Japan, and below-trend growth in developing Asia. For economies that are heavily dependent on imported oil—including developing Asia, Japan, and the euro area—this economic weakness is exacerbated by the rise in oil prices featured in this scenario. Reflecting flight-to-safety capital flows associated with the scenario’s global recession, the U.S. dollar is assumed to appreciate strongly against the euro and the currencies of developing Asia and to appreciate more modestly against the pound sterling. The dollar is assumed to depreciate modestly against the yen, also reflecting flight-tosafety capital flows.
This year’s severely adverse scenario is similar to the 2014 severely adverse scenario. However, corporate credit quality is assumed to worsen even more than would be expected in a severe recession, resulting in a greater widening in corporate bond spreads, decline in equity prices, and increase in equity market volatility than in the 2014 severely adverse scenario.
The fun part: The Fed's severely adverse scenario assumes the USD "appreciates strongly against the euro and the currencies of developing Asia" - so like... right now?
As for the just "Adverse" scenario, it involves the Dow Jonies "cratering" back 15,000 and BBB debt yielding an unheard of 6%!
Here is Deustche Bank looking crazy.
Spot the subprime auto lender...
* * *
Full Stress-Test reports below...
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great now reinstate mark to market, include the feds balance sheet.
"Banks Pass Test They Were Given Answers To"
Das Kapitalism.
100% .... this is what mark-to-fantasy hell looks like.
In a normal distribution, I'd expect 21 or 22 to be within one standard deviation. All 31 passing suggest a whacky test.
"sufficient capital to withstand a prolonged economic downturn"
Are you fucking kidding me? A few % moves in domestic real estate and they are fucked. I don't think we have seen all the damage to their balance sheets from the oil price drop either. Why don't they just say what they really mean:
"the US taxpayer(through the US govt, at gunpoint) and Fed will provide us with all the capital we need once the inevitable decline comes, making us whole again at your expense"
Lake Woebegone, where all the banks are above average.
"prove it, bitchez."
let's take this economy into those 'worst case scenario' projections and see how many of those 31 survive. wait what bets there won't be 1 standing... which means bailout 2.0, QE4, keynsian stimulus 3.0 are just a few months away.
anyone been paying attention to DXY lately?
"sufficient capital to withstand a prolonged economic downturn"
even if so, for how much longer when everyones savings are at negative rates, thus being withdrawn to invest (or lever) in alternative assets?
No grading on the curve is allowed. Everybody gets A's. We cannot fail anybody because their self esteem would be hurt.
So we make the test as easy as possible so that everybody not only passes but excels.
This does remind me of a US Constitution class which was required in College. The class all wanted the instructor to curve the scores on the Final Exam. The range of scores was 92%...an 'F'...to 100%...an 'A'. That was one of the easiest tests which I ever took and I did get a 100%. He was a good professor. I chose him for FIVE DIFFERENT CLASSES, for three previous classes to that one.
The Stress Test was engineered just like my Professor's Final Exam...except that everybody gets an 'A'.
But as you well know...
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The Economy is AWESOME. Everything is just splendid. Why aren't you?
Is it because you are lazy and non-productive?
Hugs,
Sean Hannity
I tested myself and so far have not lied to my wife or girlfriends either. The 30 street hookers did not give me any diseases. I swear honey.
funny coincidence. I watched all 3 versions (belgian, dutch, american) of The Loft last night. Killed my 'ingeniuous' idea of setting up a Malibu 'bachelor' pad with friends something fierce.
https://www.youtube.com/watch?v=1bJZYqGfYGE
Just keep repeting after me, "The Federals, always wrong, but never in doubt" That's your premise, you should know it in your sleep, start there and then draw conclusions. Otherwise nothing will make sense if you do not have the correct premise.
Section 13(b)(3)(A) of the Securities Exchange Act of 1934 provides that "with respect to matters concerning the national security of the United States," the President or the head of an Executive Branch agency may exempt companies from certain critical legal obligations. These obligations include keeping accurate "books, records, and accounts" and maintaining "a system of internal accounting controls sufficient" to ensure the propriety of financial transactions and the preparation of financial statements in compliance with "generally accepted accounting principles."
bookmark this, so you can compare it to Hitler's methods circa 1938. you'll be amazed how history rhymes...
Once all the central banks were allowed to directly monetize debt, the battle for price discovery and an honest monetary system with a functioning economy was lost.
All fiat is going die and the producers of essentail goods and serives will simply start shutting down.
Hedge accorindly, it's all you can do anyway.
All economies are about to start getting very local again...
Nice, set up perfectly for the collapse.
Credit can now catch up to equity.
I don't know which is worse, the people who think this bullshit up or the people who believe it.
Dr. ~ It's the 'latter'
IOW ~ Print more JOOBUX ~ Now godammit!
[this may be the last post you ever hear from THIRST MUTILATOR]... Well ~ consider the verity!
As always ~ I've saved a PRINT SCREEN on this... Somewhere, someday, it will be published.
Why? Are you saying Chosen People can't be mocked? The British dont seem to have any problem with it.
Miffed
@Miffed
Dead serious question...
Have you, [inbetween your 'KISSING' orgasms], EVER had your Zero Hedge user account deleted?
If not... Then STFU & proceed to, blindly, resume availing yourself to the 'other' germs at your fingertips &/or within the confines of your [sterelized or not] lab samples... at MINIMUM ~ I presume you're PAID to attend to those ones...
In effort to 'STAPLE' the aforementioned request to your massive brain... I need only to call upon my 'BROTHERS' to sing it 2 ya...
Here's the JOHNSON slappin melody in its FULL FORCE...
https://www.youtube.com/watch?v=huzYji2OAD4
First...Disco sucks.
Second...I am here as a GUEST of Tyler Durden and Zerohedge. They are not obligated in any way, shape, manner, or form, to provide any venue to me. They pay the bills for the bandwidth. I do not. I am NOT ENTITLED to use their venue and their bandwidth. It is a GIFT which I will not abuse...although, perhaps, I have pushed the envelope, on occasion, I am sure.
If I am ever admonished for pushing the edge too far (and...surprisingly I have not been) then I will restrict my speech...for them and out of RESPECT.
LOSE YOUR ENTITLEMENT MENTALITY. You are much better than that.
Third...Miffed is free to post. If she is wrong then she will get slammed. But you are on THIS POINT and you are so far out of line. Your ATTITUDE stinks to high heaven on this one.
I have agreed with much that you have written. I have disagreed with some...THIS ONE ESPECIALLY BEING A CASE POINT.
----------------------------------------------------------------
The Economy is AWESOME. Everything is just splendid. Why aren't you?
Is it because you are a muppet and destined to be fleeced?
Hugs
Lloyd.
Either someone likes disco...demonstrative of a lack of taste.
Somebody likes the ENTITLEMENT MENTALITY...Freedom is not free....that is just the reality.
Somebody cannot admit when they are wrong.
Or somebody works for Goldman Sachs...
Whatever...
-----------------------------------------------------------------------
The Economy is AWESOME. Everything is just splendid. Why aren't you?
Is it because you are apathetic and have no ambition? No problem. We will buy your EBT Card for you..with OP's money. You are ENTITLED after all..
Hugs,
The Democratic National Committee
@TT
are you SERIOUSLY attempting to challenge me to a battle of wits? [or was that a moment of insanity on your part]?
Why do you feel ENTITLED to have your musings posted?
Yes you have Freedom of Speech. Freedom is not free.
You are being HOSTED. You, as well as I, are a GUEST.
If you were in MY HOUSE and started spouting off crap that I can care less for then I would request that you leave..and back it up with FORCE if necessary.
One thing which you seem to LACK...IS RESPECT.
That is downright repulsive to most.
I have posted my address many times on this blog. If you wish to speak to me, as a man, then you are more than welcome.
If you come at me whining about how it is not fair that since you wrote something that has apparently pissed off your hosts and refuse to take responsibility, as a little kid, then do not fucking bother as you will both be wasting your time and mine.
I haven't any time for self entitled whiners and I refuse to make time for them.
Grow up and respect your hosts. Take some God Damned personal responsibility while you are at it...fucking whiner. You sound like a God damned disrespectful, whiny ass, teenager with a smart ass mouth.
STFU ... idjit
Oh how cute, I've got you frothy mad. Foaming mouths on blogs are so fun. The distance makes them safe and the public aspect of it is just so Roman Games with the up and down arrows no less!
You seem a tad stressed and need a good fight or fuck. The real kind is so much better than the virtual. Really, my sweet.
And if my account is deleted for such a statement, I shall somehow survive the ordeal. I'd hate to think being here is the sum of my life's enjoyment.
Hugs and orgasmic kisses to you,
Miffed;-)
You're somewhat out of your league here missy [namely because you described my attitiude at the moment as 'FROTHY MAD' ~ which it is anything but]...
As for good fights & good fucks..
I'm NEVER against the latter... However [the 'kissing' types, as, perhaps described in publication by amateur romantic novelists, whom, have never even bothered to wonder about their husbands PORN STASH], would NOT likely be on my, or any other modern day males 'short list' [unless such male had allowed himself to become a victim of oppression by an oppressive BITCH for so many years that his 'PEACE OF MIND' became more important to him].
Hey sissy ~ But that's just ME...
My previous comment still STANDS [my sweet]...
Whilst I'd tend to AGREE with you on the point of your ZH comments being the 'SUM OF' your life's enjoyment... I'd caution you to temper your comments as to what the 'TONE' of your future comments MAY OR MAY NOT BE, until such point that that REALITY may or may not occur...
Hint: There is a certain country in the Middle East... If you become a 24/7 sychophant towards their wishes... I GUARANTEE YOU a lifelong love fest where you can be certain of receiving bouquets of GREEN UPVOTES here on ZH as a reward for your insightful wisdom as to how 60 year old women [that Fred Sanford himself might offer an opinion on], can achieve ORGASIMS...
MWAH!
As my comment does as well. As they all do. But such a long diatribe for such trivialities does seem excessive for someone who has no interest or skin in the game. Me thinks you protest too much and therefore the victory is mine for getting to you. You are in a league of your own and those who cannot do must watch.
OXOXOX
Miffed;-)
"Diatribe" is not a word which applies to my comments [whether they be 2 or 20,000 syllables]...
I say what I have to say... Notwithstanding your 'characterization'...
Save your XOXOXO hugs & kisses & shovel them on your NON PORN WATCHING hubby... He clearly needs them more than I do... God knows if I were he I'd SERIOUSLY opt for the PORN...
When assholes like you are allowed to rave on about Jews unfettered, it ultimately results in innocent Jews experiencing the unpleasant and dangerous agression that should only be reserved for the oligarchy (of all stripes). I'm amazed you need someone to point this out.
So get over the Jewish issue. You wanna slam Zionism - being the Imperial, expansionary ambitions of Israel - be my guest. But so long as you slag Jews as a collective you are my enemy, the enemy of all decent people, and a pain in the ass to Tyler Durden who is undoubtedly under constant scrutiny by totalitarians who can pull the plug on his server/accounts
so do us all a favour, and shut the fuck up
Francis?
@ Dr. Engali... Let's focus on the SUBJECT...
Miffed need ONLY be concerned about the 'quality' of the GREEN vs, RED ratio [in this instance]...
If... Dr. ... IN FACT... The resultant GREEN ARROWS are forthcoming as the result of 'TRUTHFUL' statements, then so be it...
INSTEAD ~ If they are the result of [well ~ I could spend a lot of time to distinguish 'OTHERWISE' characteristics], I'd be wasting a lot of 'PEEPS' time...
I totally respect you [as a VALUABLE long term ZH contributer]... Therefore ~ I leave it IN YOUR HANDS to be the judge on such matters [& MORESO, the judge on matters which have transpired &/or morphed over several years time]...
HAT TIP to your service my friend... FWIW, your thoughts [but moreso, your BODY OF WORK] have truly 'MEANT' something to me in this period...
I do not unherstand why anybody would need those tests? Banks can get as much money as they want from the Fed.
Yeah but the Feds money includes only getting 2 hours of sleep at night because if they get they get more than that, they feel they may never wake again, and some things you can't pass on.
Simply add:
000,000,000,000,000.00
give or take a few 000
What a shock!!
The vehicle of the 1% is buzzing along
Dow 100,000....
Physical Gold and Silver abundant in landfills around the country.
ON A SERIOUS NOTE...
There is a lot more there than you may want to believe.
In the late 1990s I was buying scrap Gold out of Yard Sales. (I still do.)
At times a few people actually threw it away as it was "broken". I took it out of the "trash" and paid them next to nothing as I knew that I could. It was just trash to them. I am actually wearing some of that "trash" on my neck today as I had the scrap refined to create my Master's Peace. (Our peace comes from that sacrifice on the Cross after all.)
Then think about the mass of broken Computers in the landfills, all Gold Bearing.
America's landfills are nearing the point of bearing more Gold per Metric Ton then the best Gold Mines yield.
------------------------------------------------------------
Our economy is AWESOME. Everything is just splendid. Why aren't you?
Is it because you are ingnorant and too stupid?
Hugs,
CNN Business News...keeping you that way.
yeah, ok guy...
now please take ur meds and save ur energy on worthwhile commentary with someone who cares...
ps: what is a CNN?
Kisses
You misunderstood.
I will be publishing that byline repeatedly with different signatures.
That is the ARROGANCE of these people expressed. They want you to believe that everything is great with our economy and that if something is wrong then it must be that something is wrong with you.
Personally I find it to be insulting to the point of revulsion that the Mass Media has so many loudspeaker douches that promote this message.
But since you are into Precious Metals as I am, and since Gold Mine yields have been on a decline, then I believe that you should know the truth.
That was my message and you can use it to your advantage.
------------------------------------------------------------
The Economy is AWESOME. Everything is just splendid. Why aren't you?
Is it because you have invested into Barbarous Relics?
Hugs
Warren Buffet
http://www.infowars.com/warren-citigroup-morgan-stanley-merrill-lynch-re...
13 Trillion shadow bailout
What was the story yesterday about the Fed giving off-balance-sheet money to the big Wall Street banks? Was it $6 Trillion to three banks alone, and the total to Wall Street was $9 Trillion?
Just dont audit the auditors...LMAO
Like in Europe the stress-test joke continues. Noboby believes it, even the banksters are laughing.
My ass hurts just thinking about it.
Of course they've got plenty of "capital." The Fed has sucked up their crap assets for cash, which they have turned around and held in reserves that the Fed pays interest on since there's no loans out in the real economy worth the risk. It's all sunshine, lollipops, rainbows and Skittle-shitting unicorns if you're a bankster. And let the country's savers and retirees eat cake.
that's funny, CA housing bonds had their ratings upgraded from Baa2 to A3 based on those same "stress tests".
OH THANK GOD I WAS SO WORRIED AND NERVOUS ABOUT THIS!!!!!!!!!!!!!!!!!!!!!1
Billy Mays voice: "Are you a muppet who is tired of replacing your underwear every day because you can't remove the blood stains from the banker anal raping? Then you must try Bankeraway. Just a few squirts will leave your underwear sparkling clean. No more need to replace underwear that has nasty, grimy blood stains. Try Bankeraway today and enjoy your fresh underwear tomorrow." [stealing from Southpark]
Isn't it just easier to put on the red underwear and crank up the denial notch for one more day.
Yay team!!! Everyone gets a trophy. Who wants a smoothie? Janet's buying.
Well, I've been waiting an awful long time for my pony. I'm beginning to think it won't come. Maybe tomorrow, maybe tomorrow.... That's all I tell myself. There's always tomorrow...right?
Miffed
Yesterday, all my troubles seemed so far away, now I know there here to stay, oh I believe, in yesterday.
Tomorrow never comes as when another day dawns it is not tomorrow as a certainty. It is today.
You have heard it said that today is the first day of the rest of your life? That is not always the case. It is true for every day except one. If it is the last day of your life then it is certainly not the case.
____________________________________________________________________
The Economy is AWESOME. Everything is just splendid. Why aren't you?
Did you not invest into the Stock Market when it was ordered that you were to, back in March, 2009?
That is what you get for not following my dictates.
Hugs
Barrack Obama, your Slavemaster in Chief.
Wait a minute. If the FED can print unlimited amount of money to soak up any of the spills, who are these tests supposed to impress?
I remember Noriel Roubini's remark several years ago. The fact that the banks need a stress test to qualify for a AAA credit rating means that they do not deserve an AAA rating to begin with. It is the test of the absurd.
Most drop dead gorgeous women ( I wish I had known) don't have to enter beauty contests to reassure themselves they are beautiful.
Look,Hemingway was a hack writer and a world class bullshitter,alcoholic,etc.
But he did a great article on the German hyper-inflation for the Toronto paper he was at.
He talked about being able to walk across the border and with five bucks (US) he could buy the entire
contents of a German sporting goods store. This was a long time ago but the lessons hold true.
A currency backed by air alone doesn't go very far.
But what about the full faith and credit of the USA? LOL
But what about backed by an Army, and war planes and fighter jets and Victoria Nuland, and $ 5 Billion?
How far does that go?
iPrint 6.0 passes the beta testing phase.
In which case, with CB hubris at all time highs......it must be time for a crash! Bring. It. On.
"great now reinstate mark to market,"
Can't do that. They would implode.
It has to to continous mark-to-fantasy.
Let us not forget that when things get serious, you have to lie. So when things get serious-er...
http://olduvai.ca
Interesting that Comerica also has a lot of the Shale loans...as well as Auto
It was the Austrian customs union which caused the French to withdraw their financial support to the Austrian banks which caused Kredit-Anstalt to fail.
Kredit-Anstalt had been forced to absorb two smaller insolvent banks,which put their books in bad shape.
This event (1931?) coupled with the failure of two major German banks (Nord-Rhein Wolle,and a Dresden bank) caused the collapse of the German currency and the later rise of Hitler.Many American Bankers and Industrialists saw the right-wing parties in Germany as a bulwark against the Russians.
Stress test....pppfffftt
and I can jump this high.
So, since the oil price-drop, I've been saying that QE would be implemented on large scale in Europe when Deutsche Bank screams from their emerging market losses.
Is it a little more clear what I've been talking about? About what happens to DB in an 'Adverse' scenario?
And EU QE will begin in...
Why do they need these so called "stress tests" ?
When the banksters win they keep it.
When they lose, they just tap into thier donkey taxpayer base to fund their losses as they've now been doing continuously since 2008.
Nothing stressful about that.
It should read Dodd Frank Taxpayer Stress Test.
Barney Frank knows what stress a real pain the ass is !
Which it should be pointed out, was not safe at all.
So is this pass the same as a sub-prime is well contained sort of pass?
stress test this bitches!!!
Yeah but just look at the presentation. Nice charts and graphs and such and just enough to sucker punch all the sheeples in so the FED can give them another economic roofie and this time really take thier time.
http://www.vancouverfinancial.net/blog/blog.html
It's like a test for University of Alabama football players.