bank stress tests

Recent stress tests on America's big banks reveal that the financial crisis is far from over. While the "too big to fails" are in better shape than they were in 2008, there's still "room for improvement at virtually every firm."

The Federal Reserve plans to stress test six large U.S. banks against a hypothetical market shock, including a deterioration of the European debt crisis, as part of an annual review of bank health. The Fed said it will publish next year the results of the tests for six banks that have large trading operations: Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.

The Fed's decision to allow big banks to pay sharply higher dividends makes no sense, and not just because the results of the so-called "stress tests" are secret. Based on facts that are public knowledge, the banks are actually insolvent, and in danger of sinking much further.

As big banks start reporting earnings, JPMorgan CEO Jamie Dimon is the latest exec to talk about dividends. Overall, Wall Street is expecting the big banks to post strong results, including improved credit quality and increased capital.

This week, the Congressional Oversight Panel recommended that the nation's big banks be stress tested again, because if problems with mortgage-backed securities are widespread, the consequences could be dire. Now, the Fed has agreed to run those tests, which it wouldn't do if it wasn't worried.

Although Wall Street anxiously awaited the results of bank stress tests in Europe, the real news is elsewhere: the improving economic conditions across Europe. Can the U.S. learn a lesson from Germany and France?

Banking regulators tested the soundness of 91 European banks this week to see if they could withstand a financial crisis, and only seven failed to pass muster. But some analysts say the tests may have been too easy, and wonder what would happen if a real "worst-case scenario" hit.

This morning, the Federal Reserve announced that it is going to postpone the release of the bank stress test results, which were supposed to be made public on May 4. The results will now be released on May 7. One reason for the delay is that regulators and bank execs are a bit concerned about how...

News has begun to leak out that the government is leaning on some of the 19 banks that went through the "stress test" designed to predict what will happen to them if the economy gets worse. Banks that fail will be asked, not politely, and perhaps pressured, to raise private money. If they cannot,...

Following Lawrence Summers' oddly inconclusive remarks yesterday to the Economic Club of Washington, the Treasury Department has asked banks to keep mum about the much-ballyhooed "stress tests" that they have undergone to determine their capital needs in difficult economic conditions. The apparent...