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May 11, 2009

Are the 'Stress Tests' bogus?

Editor's note: The Wall Street Journal questions the fairness of the stress tests as the banking wolves go for each others throats.

Goldman Test Stresses Rival Morgan
By PETER EAVIS

Why did the stress tests treat Goldman Sachs Group better than Morgan Stanley?

In the worst-case scenario used to determine bank capital needs, the government posits that Goldman might be 2½ times as profitable as its main rival this year and next.

...

Were the tests' assumptions "stacked in Goldman Sachs's favor?" asks Michael Hecht at JMP Securities...

Editor's note: I don't know if the 'tests' were stacked in Goldman Sachs's favor but it appears the wolves are at each others throats. When Merrill's economist David Rosenberg left the firm on May 8, he described the recent run-up in stock prices as a sucker's rally.


Read the full article - Click Here
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Posted by Larry Rubinoff at 10:52 AM

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