Karl Denninger Blog
Stress Tests: What's That Light?
Tuesday, May 5. 2009
It's a train.
The "rumor" floated over the weekend and this morning was that some of the banks might
need $10 billion under the "stress" scenarios.
That they might be able to raise, and it has been part and parcel of fueling the rally.
Not so fast, grasshopper.
S&P yesterday afternoon stuck virtually the entire sector on Credit Watch Negative and that was just the start.
There are now some independent analysts out there with their own numbers on "required capital", and they're ugly.
Friedman Billing Ramsey came out and said they believed that Bank of America
needs $60 billion all on its own, while Egan-Jones piped up and
said the number was $100 billion!
SNL Financial, a research firm, thinks the number is
$50 billion each for Citi and Bank of America - minimum - and might be
closer to $70 billion for Bank of America.
Nor does it end there. Wells is projected to
need $66 billion and JP Morgan
needs $33b, according to these folks.
But if you think those numbers are a horror show, the real ugliness isn't found there. It is in fact found in all the foreclosed-but-unsold and not-yet-foreclosed "but will be" housing stock. Through the nation I am getting reports, some hard and some anecdotal, that lenders are sending out NODs (default notices) and then sitting on the process intentionally.
Why would they be doing that?
Continues: http://market-ticker.denninger.net/a...hat-Light.html