A couple of days ago I wrote a bit about the fiasco known as the Federal Reserve's stress test.
Two significant points jumped out at me from the report other than the fact that the whole thing appeared more like a public relations effort more than an actual banking evaluation:
"First, that Bank of America needs an additional $33.9 billion in capital. Wasn't CEO Ken Lewis quoted as saying as recently as a few weeks ago that Bank of America was going to repay the TARP in 2009?
And second, Citigroup is estimated to need only $5.5 billion in additional capital. Hmm, we'll see if this projection holds."
Well, as it turns out, according to an article by Reuters, the Federal Reserve had initially claimed that Citigroup's capital shortfall was $35 billion, only to be talked down to $5.5 billion due to "future capital-boosting impacts of pending transactions."
But Citigroup wasn't the only bank to grease the Fed. Well Fargo and Fifth Third's were also able to talk the Fed down.
Not that any of this really matters because the Fed was never actually going to find any of these banks insolvent. Yet at the same time the government still feels the need to pursue perhaps the largest heist of tax-payer money in recent memory, the PPIP.