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Banks Seem More Stressed-Out Than Stress-Tested
Perhaps the bank “stress tests” should have included a prescription for Valium, for many banks seem more stressed-out than stress-tested. When the results of the bank stress tests were announced, the government proudly proclaimed that the banking system was sound, that banks would be able to handle whatever adversities the economy could dish out. The results also showed an expected baseline for unemployment and a worst case scenario, and Treasury Secretary, Geithner assured us that their calculations demonstrated that our banking system could withstand a worsening economy.
 
But the stress tests didn’t imagine that the economy might sink below their more adverse scenario. While it may have been difficult for them to envision employment levels sinking below those of recent recessions, that is the reality for the millions of jobless who have no prospect for employment. The stress tests’ worst case unemployment numbers have been exceeded in each of the first three quarters of this year; and today’s release of the numbers for August show that we’ve already reached their fourth quarter worst case projection.
 
According to the FDIC, 25% of our banks are currently unprofitable, suffering from mounting foreclosures, defaults from small business, and with a second ... more

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