No Transparency in Stress Tests

No surprise here. The Fed gives little details about how the stress tests were conducted. Analyst Josh Rosner said, “The most significant numbers provided by the Fed in the paper appear to be the page numbers.” (Bloomberg) Why won't they give details? Because the banks would fail any test with any stress in it at all. So, instead, the Fed says, "trust us." If we really could trust them, they would give us the data.

However, even if banks pass the stress test and have money to lend out, they won't. Why? As the CFO for Capital One said, investments are much more appetizing than lending in this environment. He said that they will wait for things to get better before resuming lending.

Translation: We're losing our shirts on credit cards, so instead of lending any more, we will put all our deposits in Treasuries, wait for things to get better, and hope we survive that long.

Tactic and strategy: wait.