Feds Screw Banks One More Time

The Fed has shifted the goalposts yet again on the banks - this time just in the last couple weeks, which means that banks are going to have to raise even more capital on top of the useless excess capital they just finished raising. As financial services analyst Tom Brown explains,

If what the (Wall Street) Journal is reporting is true, the Fed has succeeded in making a truly asinine, costly regulatory process even more asinine and costly than it was before. Which is saying something.

...First of all, if history is any guide, regulators’ loss assumptions for the next two years will end up being way too high and its estimated PPNR for the banks way too low. Yet despite these overly conservative assumptions, regulators are still requiring that banks build capital to levels that are materially in excess of what the Fed says it believes constitute “well-capitalized.” Don’t ask me why the government keeps insisting on moving goalposts. The stress test is best understood if you simply assume that everything the government does is irrational, or soon will be. The whole idea behind the stress test, and banks’ post-test action plans, has never made sense. This latest change, if true, makes the process crazier than ever.

Governments are not successful at running businesses - in any way, shape or form. Very few people in the government, including Obama, have any clue whatsoever what makes the economy work. And somehow we are supposed to be comfortable handing over even more of our economy to the government?