Stress Test

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 23/07/10 (Bank Stress Test Special)

Update: Comments from Spain's Salgado taken out of context according to a Spanish official. Appears a caja or two will be sacrificially thrown to the lions after all. The Farce must go on!

• All Spanish banks pass stress tests
• All French banks pass stress tests
• Pretty much all Greek banks pass stress test

HA HA HA

The farce will continue until bullshit flows freely

The bank that has been bailed out a hundred times before is, shockingly, rumored by Bloomberg to not pass the stress test. In other news, all Greek banks are doing swell for now.

Another day, another accounting debauchery by Europe. In the latest development, Reuters reports that as per the recent JPM "suggestion" posted previously on Zero Hedge, Greek debt is now expected to be haircut by 23%, or to reflect current market prices. Allegedly this is yet another failed attempt to restore some confidence in the entire farcical process. There is, of course, one caveat: the haircut will only pertain to trading books. In other words this is Europe's equivalent of FASB 157: everything that banks hold "to maturity" will not see a major haircut, and very likely not see any haircut at all. Which simply means that all European banks that hold such debt will merely reclassify their Greek exposure from trading to a "held to bankruptcy at par" category. The surreality of European banking assets (which as we pointed out previously is a $100 trillion circle jerk where one bank's assets are another bank's liabilities) has now passed well into the twilight zone. But never fear, the ECB is here. Which begs the question: will JC Trichet's books also be exposed to some sort of stress test? After all Europe's central bank is on the hook for over $1 trillion in impaired debt now - does this mean the central bank will in no way be subject to any haircuts or other viability tests? Why of course, how else will flagrant lies about financial system's stability be perpetuated for at least one more year.

Just a rumor for now. On the other hand, it conforms precisely to Credit Suisse's earlier announcement that Post Bank, in addition to Greek ATE, Piraeus, Helenic Postbank NBG would fail the Stress tests. (more to come).

Just as Europe was happily gloating that it managed to push markets up with the second stress test rumor of a Greek debt haircut of 16-17%, here comes JPM's Francesca Tondi dashing European bank regulators' hope, and stating that anything below 30% on Greek bonds, 20% on Portugal, 15% on Spain, and 10% on Italy, Ireland and Hungary (in the base case scenario), is a joke. Below is the sensitivity table that serves as the framework for JPM's stress test. As can be seen, even the optimistic scenario is far more draconian than what Europe is planning on using, thereby discrediting the test, whose assumptions are now likely going to be revised yet again to be seen as anything remotely credible.

Are these people insane? Have they all really bought Tim Geithner's Kool Aid that somehow because they conduct doctored stress tests, which incidentally find that insolvent banks like STD are at the top of the healthy list, that all will be well? Do they rally think that investors are idiots and can not see behind this farce, let alone put together a 5 minute excel model and discover that all Spanish banks are now in runoff mode? So much propaganda, so little answers.

BN   8:43 *ZAPATERO SAYS STRESS TESTS WILL SHOW RUMORS UNTRUE
BN   8:43 *ZAPATERO SAYS SPAIN WILL PUBLISH STRESS TESTS FOR ALL LENDERS
BN   8:43 *ZAPATERO SAYS THERE IS NOTHING BETTER THAN TRANSPARENCY TO RESOLVE RUMOURS
BN   8:48 *MERKEL REJECTS GERMAN BANKS' CRITICISM ON STRESS TESTS
BN   8:50 *TRICHET SAYS `HAPPY' WITH CONSENSUS ON BANK STRESS TESTS

A few days ago we wondered if Tim Geithner was a pathological liar, an idiot or just confused. Today we may be one step closer to getting the answer. In an unprecedented gesture of magnanimity, also known as an expression of the US banking cartel's control over the world, the Treasury Secretary will advise Europe to conduct the same sham exercise in fraud and lies, as America did when it conducted its own Stress test, which found that all US banks are perfectly solvent (as long as they all have direct access to the Fed printing press). Geithner's thinking is that once Europe also "realizes" that each and every bank is "perfectly viable" despite all the evidence to the contrary, that investors will say "boy, we sure look like idiots being worried, when the very credible EU itself says everything is fine." Of course, this is the opposite of what will happen. It does, however, bring questions to the legitimacy of our own stress test, which as everyone knows was a well-engineered goal seeked sham designed to do nothing but to also fool investors into a false sense of calm that the ponzi still has some life in it.

Here we go again ...

Just like a Swiss watch, bank failure #33 for the year is Westsound Bank, of Bremerton, Washington. The bank's assets will be assumed by Kitsap Bank of Port Orchard.

Every now and then the general public gets a chance to see just how valid the green shoots theory really is. Next Friday may prove to be just such a case. On this date, 20 of some of the gnarliest and most troubled stressed and distressed high yield credits have a simultaneous IOU due to their respective lenders, either in the form of an interest payment or outright maturity. Zero Hedge has compiled the list of the 20 most interesting suspects to watch carefully.

At the end of the day fund flows talk and TV propaganda walks (and both have a 30 day grace period).

Every now and then the general public gets a chance to see just how valid the green shoots theory really is. Next Friday may prove to be just such a case. On this date, 20 of some of the gnarliest and most troubled stressed and distressed high yield credits have a simultaneous IOU due to their respective lenders, either in the form of an interest payment or outright maturity. Zero Hedge has compiled the list of the 20 most interesting suspects to watch carefully.

At the end of the day fund flows talk and TV propaganda walks (and both have a 30 day grace period).

Every now and then the general public gets a chance to see just how valid the green shoots theory really is. Next Friday may prove to be just such a case. On this date, 20 of some of the gnarliest and most troubled stressed and distressed high yield credits have a simultaneous IOU due to their respective lenders, either in the form of an interest payment or outright maturity. Zero Hedge has compiled the list of the 20 most interesting suspects to watch carefully.

At the end of the day fund flows talk and TV propaganda walks (and both have a 30 day grace period).

Quant and heat mapping: inflation up, deflation down, quality marginally up, garbage pillaged. Marginal quant leveraging.

The product of the great spin is out! Everything flying after hours. State Street and BONY now pulling the borrow in State Street and BONY, kinda poetic. And, of course, all leaks were right on the money. Over under on the leakers actually getting prosecuted?