The awesome program that is TARP (Troubled Asset Relief Program) continues to work its wonders. According to the Wall Street Journal, "lending at the largest banks is actually down in February by 23%". Here's a graph breaking down each of the individual banks.
The main purpose of TARP was to make sure that credit continued to flow so that these banks could make loans out to customers. The Obama administration response to this data is to say that things would be much, much worse without the TARP program; which is something that would be difficult to prove (either way). However, for most people, the return on this 700 billion dollar project has been more than disappointing. What started off as a horrible idea by the Bush administration, has turned into Obama's nightmare. By the way, I haven't even mentioned the power grab ability that this TARP project has given to the government.
While we're on the subject of banking let's talk about the stress test. For those who have already forgotten, "stress tests seek to measure a bank's ability to continue lending under extreme economic conditions. To help shore up confidence in the banking sector, the government is expected to distinguish between banks that need more capital and those able to withstand a worse and prolonged economic downturn."
There has been a lot of concern over these stress tests in government and financial circles. Many of them, including Treasury Secretary Timothy Geithner, believe that many of these banks are under capitalized. A website called Turner Radio Network says that they have a gotten a copy of the stress test results that are not suppose to be made public until May 4th. This is the same website that actually got the leaked out report concerning Homeland Security targeting "right wing extremists", so they do seem to have some sort of track record of correct reporting. Anyway, the alleged results of this test is down right scary. I will post what they had on their site.
LEAKED! Bank Stress Test Results !
1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent. (Based upon the “alternative more adverse” scenario which had a 3.3 percent contraction of the U.S. Economy in 2009, accompanied by 8.9 percent unemployment, followed by 0.5 percent growth of the U.S. Economy but a 10.3 percent jobless in 2010.)
2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans. (Without further government injections of cash)
3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.
4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.
5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.
6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital! (HSBC is NOT in the top 19 banks undergoing a stress test, but is mentioned in the report as an aside because of its risk capital exposure to derivatives)
7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts!
The debt crisis is much greater than the government has reported. The FDIC`s "Problem List" of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.
Put bluntly, the entire US Banking System is in complete and total collapse.
Again, the results on these tests have not been made public but it could be a very, very ugly day on May 4th.
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