At 5:00 PM this afternoon, the bank “stress test” results were published.  From the looks of it, a number of banks need significant amounts of capital (originally posted at Calculated Risk):

Once you look past the fact that roughly $75B more is needed, one has to ask “what does this really mean?”

I’m afraid to say that the results may mean nothing.  Yes, $34B for Bank of America is a boat load.  Same goes for the $15B Wells Fargo and $11.5B for GMAC need, but what if the additional funding does not help in the long run?  I ask this question simply because there is significant doubt around the credibility of the stress test results.

The assumption the test is based on is that these 19 financial institutions could potentially face another $600B in losses under “the worst conditions” but what if it’s more?  What if there is another $1.2T in losses? Will the banks be able to turn to the private markets in order to raise capital, as Wells Fargo is already saying they will do?  Would the investment community continue to throw money down the hole, or would Uncle Sam need to act as backstop once again?

I still believe the worst is yet to come.

Related posts:

1. From the obvious file – Banks need capital If you take a quick trip down memory lane you...
2. The bank stress tests don't mean a thing Since the announcement that the federal government was going to...
3. Boy, what do you think this means – US to delay bank test results If you think back several weeks with me, you’ll remember...
4. Banks to stay quiet of “stress test” results, but is it legal? Over the last week two distinct stories about the bank...
5. US investigators warn bank stress tests not enough Most people questioned the viability of the “Stress test” performed...

Related posts brought to you by Yet Another Related Posts Plugin.