Phantasmix Stock Blog

Reprinted with permission. Full commentary at Beat the Dart

The Federal Reserve said that the government is prepared to rescue any of the 19 banks that underwent “stress tests” and were deemed vulnerable if the recession sharply worsened. Since the 19 banks hold one-half of the loans in the U.S. banking system, they won’t be allowed to fail — even if they fared poorly on the stress tests.

“Too big to fail,” is the agenda. Indeed, taxpayer money remains at risk on behalf of banks that have received billions in government bailouts and guarantees. While the Fed released little new or concrete information, it was assumed that if the recession get worse, the Fed would have “an open check book” to pump more money into them without Congressional review, and further offered that a bank needing more capital to cushion against loan losses under its “adverse” economic scenario… should [be] considered insolvent.

To date, the government has committed more than $11 trillion in loans, investments and other measures to prop up troubled institutions and stabilize the banking system, and may need to triple that amount before the recession is over. Where the money is going to come from, is another story.