Stress Tests Conclusion: Banks Are Stressed!

Some of the nation’s 19 largest banks have substantially reduced capital as a result of the recession and the mortgage crisis, the Federal Reserve’s stress tests show, according to Bloomberg. At the same time, most banks have more than enough reserves on hand to cover any potential losses, the Fed’s paper describing the stress tests said.

The paper, part of a federal effort to restore public confidence in banks by gauging their capital strength, doesn’t reveal which banks need capital or specify their total shortfall. The Fed used qualitative terms such as “some” and “more,” typical of other central bank documents.

Clearly, the Fed is avoiding specifics at this point. Until we get more than this, it will be hard to determine how geniune the Fed’s promise of transparency is going to be. Another report is expected May 4.