One of the very few "green shoots" pertaining to our extremely unstable financial system, that had been greeted by bulls far and wide was the alleged decline in loss provisions and charge-offs by banks and credit card companies in recent months. In fact, JPMorgan's rose-colored commentary on trends observed in this area during Q1 was supposed to be the catalyst to push financials to a new high during this earning season, until we uncovered that Europe is broke, and that everyone decided to sue Goldman, which had a slightly more adverse reaction on stocks. Amusingly enough, and in confirmation that no lessons have been learned, the San Fran Fed has released a mistitled paper called "Loss Provisions and Bank Charge-offs in the Financial Crisis: lesson learned" which confirms that banks are once again blindly rushing to repeat the very same mistakes that were part and parcel of the array of flawed judgments that led to the bursting of the credit bubble built on a house of cards of good intentions and optimistic projections. The paper concludes: "The recent financial crisis and recession have painfully demonstrated the vulnerabilities associated with the bank loss-provisioning process. It’s clear that provisioning should be more forward looking. However, even a more forward-looking provisioning process would not have fully addressed bank vulnerability to the extraordinary events of the past few years. By definition, loan loss reserves are designed to absorb expected losses. Even if banks had better forecasts and more discretion in setting reserves, they would probably still be unable to adequately provision against unexpected large economic shocks. Guarding against such shocks is the role of capital. The lesson of the financial crisis is that the buffer against downside risk must come in the form of higher bank capitalization." Amusingly, just as various amendments seek to cut regulatory cap ratios, banks are once again rushing to lower their loss provisions, soundly refuting the FRBSF's thesis that the US financial system can ever learn from anything that occurred more than 24 hours prior. We are confident that as the "priced to perfection" scenario unravels, even such overly optimistic captains of industry as Jamie Dimon will once again be forced to readjust their loss provisions materially higher, leading to a new regime in financials, in a direction which however will not be to the bulls' liking.