Sense on Cents

Unemployment hits 10.2% and every self-respecting economist knows it is heading higher.

Does anybody want to ask Tim Geithner if he wants to review the rigor and integrity of the Bank Stress Tests conducted last Spring? What were the assumptions used for the Unemployment Rate? For those who care to review the premises of the long ago but now forgotten Bank Stress tests, I submit from the FDIC, FAQs-Supervisory Capital Assessment Program. In regard to the assumptions used for unemployment:

2009 Base Case 8.4%
2009 Adverse Case 8.9%

2010 Base Case 8.8%
2010 Adverse Case 10.3%

Garbage in, garbage out. We are now within .1% of the more adverse unemployment case for NEXT year. Not that it might matter given the fact that the liquidity experiment undertaken by the Fed and Treasury is bubbling up in asset valuations while neglecting Main Street’s economic plight. That said, I would once again question as I did last April, “Bank Stress Tests: Major Sham??”

What are the implications for sham transactions? Subsequent misallocation of funds in order to cover and disguise the initial sham. I am not stating that government officials are stealing, although I’m not stating that they’re not. I am stating that there is little doubt that future funds continue to get redirected into organizations (banks, Freddie, Fannie) and programs the health of which were not accurately represented to the American public. (more…)