Charting Stocks

Much has been made about the so-called bank stress tests which are being conducted by the US treasury though the government has revealed little or no information on what the test might entail.

Tim Geithner has described the stress test only as “a more consistent, realistic and forward looking assessment about the risk on balance sheets,” administered by “the government agencies with authority over our nation’s major banks.”

Regardless of what the test is or isn’t, the idea seems to be to evaluate large individual banks balance sheets and determine they’re ability to stay solvent.  Our question is why now? Two years into this economic collapse and they’re only now going to evaluate the healthiness of major banks? Shouldn’t they know this already?

The FDIC is the primary agency charged with the task of conducting ongoing bank “stress tests. ” Their websites states their mission as the following:

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress that maintains the stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions, and managing receiverships.

Examiners should be constantly inspecting the solvency of all banks. When a banks capital ratio gets to low, the FDIC is obligated to step in and seize the assets to prevent the bank from taking undo risk in hopes of returning to normal capital ratio’s. Was the FDIC asleep for 2 years or is this just a government sponsored media campaign to ease the public into injecting even more taxpayer money into failing institutions?

Related posts:

1. Bank Failures at 40 for the Year; FDIC Seizes 3 More
2. Obama has succumbed to bank scare-mongering – Joseph Stiglitz
3. These 10 Banks Will Repay TARP
4. Bank No. 37 Closed; Bank of Lincolnwood Seized by Regulators
5. Stocks Will Drop; Banks Will Go Belly Up – Roubini