Fed Tells Banks to Stress-Test Capital for Recession With 11% Unemployment

Bloomberg

Feb 17, 2011

The Federal Reserve ordered the 19 largest U.S. banks to test their capital levels against a scenario of renewed recession with unemployment rising above 11 percent, said two people with knowledge of the review.

The banks stress-tested the performance of their loans, securities, earnings, and capital against at least three possible economic outcomes as part of a broader capital-planning exercise. The banks, including some seeking to increase dividends cut during the financial crisis, submitted their plans last month. The Fed will finish its review in March.

“They’re essentially saying, ‘Before you start returning capital to shareholders, let’s make sure banks’ capital bases are strong enough to withstand a double-dip scenario,’ ” said Jonathan Hatcher, a credit strategist specializing in banks at New York-based Jefferies Group Inc. Regulators don’t want to see banks “come crawling back for help later,” he said........

......The Fed’s adverse economic scenario included a 1.5 percent decline in gross domestic product from the fourth quarter of last year through the end of 2011, said the people, who declined to be named because the Fed hasn’t made the details of the review public. The scenario assumed growth resumes, with output rising 4 percent over the fourth-quarter 2010 level by the end of 2013. Unemployment would peak at more than 11 percent by the first quarter of 2012 and drop back to 9.5 percent by the end of 2013.

One day a person will ask me, "Where did you meet your wife?" I will answer, "At the local unemployment line."

"Stress tests" are nothing more than Bernanke looking to cover his butt should something go askew with his money printing debacle.

He knows it's coming down the pike, and when the all the cards are on the table his gamble will force everyone in America to fold.

Hope you all stocked up on food and ammo. You're gonna need it.

reply to post by Lunatic Pandora

Hope you all stocked up on food and ammo. You're gonna need it.

Sorry but we canadians are out of luck for guns or ammo, megzs packs are very expense here in canada, not to mention the guns as well.

As for the food, some of the canadians are getting ready actaully.