Stress Test: Throw Another Trillion Into The Woodchipper

The Bailout

Waiting with baited breath for the results of the US Government’s 19 bank stress tests?  Here’s an appetizer from the folks over at Keefe Bruyette & Woods, who’ve conducted their own stress test:

From Bloomberg:
U.S. banks may need another $1 trillion in capital to cushion against losses as unemployment rises and borrowers fall behind on payments, KBW Inc. analysts led by Frederick Cannon said today.  The estimate is based on the analysts’ own “stress test” of the strength of top U.S. lenders, Cannon wrote. The government is also evaluating the ability of banks to withstand a deepening recession.

Oh boy.  I guess what’s another trillion at this point? 

Some questions…

Did Cannon pick that big, juicy round number for the headline-grabbing potential…or are we truly in big trouble? 

And if these numbers are close to the truth, what kind of spin will we get from the Government when the official stats come out on May 4th?

And is it true that the tests were tougher on the regional banks than the money center banks?  If so, why?

Full Story: Banks May Need $1 Trillion

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