Treasury Secretary Geithner is spinning the results of the not too stressful stress tests. He says everyone will be please with the results of the tests that all tested banks would pass regardless.
“I think the results will be, on balance, reassuring,” Geithner said. “None of those 19 banks are at risk for insolvency.”
I guess that depends what your definition of insolvency is. We know that loan losses are increasing in all sectors of real estate. We are expecting unemployment to increase some more. We know at least 20% of home mortgages are currently underwater. That doesn't look like a very good scenario.
Consider this: under a not too stressful 'stress test' BofA is said to need an additional $34 billion in capital. What would happen if this was a real 'stress test'?
How much of this additional capital will be equity versus more debt?