28 April 2009

Stress Test Update

We are already getting reports, and the latest is that preliminary results show that Bank of America and Citigroup are under capitalized.

The truth is that it is very likely that all 19 banking giants are under capitalized, and that Citi and BoA are insolvent, but the tests would be universally seen as a joke if they had cited these two banks as needing more capital.

One area of concern here is that there is a a tremendous opportunity for insider trading and abuse here, and no one knows who has the data, and who doesn't, so I would expect that some people are trading on this, or will be in the next few days.

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