Since the announcement of the Bank Stress Test the US Government has been promising a level of transparency that was suppose to shed light on the real condition of the largest banks in the USA. The official results were announced at 5:00 PM EST but the actual results had been leaked to the press over that past two weeks.
With the test scores in, Wall Street seems unsurprised by the results. The US Government seems to have spent more effort on releasing the information so as not to disrupt the markets, than realistically testing the banks. This test was supposed to see if banks could handle another future financial earthquake. Instead it seems to have tested if they could handle what may be a best case scenario.
The US government used both a worst case scenario and a more “probable case” to test the possible financial needs of Americas 19 largest banks. The “probable case” unemployment for this year has already been met. The Federal Reserve Chairman during his last testimony to congress stressed the increasingly concerning commercial real estate industry, but the test puts little weight to it. The Bank Stress test seemed to be more political propaganda to spur optimism than a true test of structural integrity.
Consumer credit was released today showing consumers paid down debt $11.1 billion in April instead of the forecasted reduction of $4.2 billion. The consumer still appears to be concerned about debt reduction than expansion. The backbone of the US governments recovery plan is to expand lending and spur consumer spending.
United States Railroad freight traffic was down 23 percent in April and 18.2% year to date. Railroads move raw goods around America. The Association of American Railroads Senior Vice President John T. Gray was quoted in a released statement “Unfortunately, it’s hard to find much in rail traffic data in April to support the idea that the economy is starting to see ‘green shoots’ … it may still just be weeds”. How can manufacturing be recovering without the raw goods to make products?
Tags: bank stress test, consumer credit, economy, federal reserve, railroads
