If you thought the stress tests were rigorous and would reveal the true financial situation of the nation's largest banks, think again. According to the WSJ, when banks were presented with the initial results of the stress tests, they fought back and the government conceded and adjusted the amount of capital downward, in some cases by a significant amount (see Bank of America that was originally ordered to raise over $50 billion.) Furthermore, according to the FT, instead of needing to raise the full revised-down $75 billion, banks will now be able to meet their capital raise through "earnings" over the course of the next six months. With the relaxation in mark to market rules, a zero overnight lending rate (the benefit of which banks don't need to pass on to consumers), and the government's generous support of the credit markets through its variety of programs, drumming up some earnings should be a snap. Problem solved. Banking system saved.
The problem now is dealing with the economy. Friday's unemployment report was grim. Sure, it was "better than expected" but once revisions were added and the temporary census workers subtracted, the economy lost around another 700,000 jobs. Even if you ignore the revisions and the census workers, since when has losing 539,000 jobs in a month been considered incredibly bullish? If this is a green shoot, then, well, shoot me. Because we still have the fallout from the auto industry, the retail industry, and the commercial real estate market to deal with. When we've figured out what industry exactly is going to pick up the slack for those we've lost, I might consider being an optimist again.