The examinations and stress tests are shams
Former Bank Regulator William Black
Stress Test Optimism Just Wall Street Propaganda
Why would who apply lipstick to drive equity markets higher
to improve what could be insolvent capital structures
of taxpayer bailed out enterprises
by duping investors to invest more than $50 billion
to support current stakeholders
at the expense of other people’s grandchildren?
How could some describe efforts to increase confidence
to create a window to raise capital
through secondary common stock offerings
and new debt issuance?
"Pump and dump" is a form of…stock fraud
that involves artificially inflating the price of a…stock
through false and misleading positive statements
in order to sell…at a higher price
Once the operators of the scheme "dump" their overvalued shares
the price falls and investors lose their money
The exams are too easy; the banks get to take them home with cheat sheets
and if they don’t like their final grade, they can appeal for a better one
…Our analysis directly contradicts the overall conclusion
…that most bank holding companies are well capitalized
Former president of a national rating agency
National Press Club, May 5, 2009
The Federal Reserve…significantly scaled back the size
of the capital hole facing some of the nation's biggest banks
following days of intense bargaining over the stringency of the stress tests
…the Fed used a different measurement of bank-capital
… than analysts and investors had been expecting
resulting in much smaller capital deficits
David Enrich, Dan Fitzpatrick and Marshall Eckblad
Banks Won Concessions on Tests
Fed Cut Billions Off Some Initial Capital-Shortfall Estimates
Wall Street Journal, May 9, 2009
If Rating Agency stress tests considered toxic waste AAA
when AIG’s Joseph Cassano stated
It is hard for us, without being flippant
to even see a scenario within any kind of realm of reason
that would see us losing one dollar in any of those [CDS] transactions
in August 2007
and Treasury Secretary Paulson
testified that Fannie Mae and Freddie Mac were
adequately capitalized
and
even in [Freddie's] most severe stress tests
[show] losses ... less than $5 billion
in July 2008
while IndyMac’s losses on more than $200 billion of "liar's loans"
were about 160 times greater than stress tested
A "false representation" can take many forms, such as
A false statement of fact, known to be false at the time it was made
A statement of fact with no reasonable basis to make that statement
A promise of future performance made with an intent
at the time the promise was made, not to perform as promised
A statement of opinion based on a false statement of fact
A statement of opinion that the maker knows to be false
or an expression of opinion that is false made by one claiming or implying
to have special knowledge of the subject matter of the opinion
"Special knowledge" in this case means knowledge or information
superior to that possessed by the other party
and to which the other party did not have equal access
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