At the Treasury meeting, I commented that the insurers were better regulated for solvency than the banks. One of the reasons for that is that they do harder stress tests, and they look longer-term.
So, if one is trying to regulate banks for solvency, there are two things to do:
•Set risk-based capital formulas so that few institutions fail.
Get Real On The Economic Recovery And Stock Market Rally
The rampant bullishness prevading the stock market is raising alarm bells. Today, we are, at best, peering into a nascent economic recovery but Dow Jones Industrial Average have already crossed 10,000 (about 30% off the all time high of 14,198 in October 2007) when peak euphoria reigns amongst investors. If that is not getting ahead of ourselves, I don’t know what is.
Yow! Number of Banks Not Making TARP Payments Skyrockets!
Lessons of Financial Crisis Forgotten In Heady Speculation
Financial crisis or the Great Recession, if you still remember them, seems so far away… we are now in the best six-month stock market rally since 1933. The bulls have been running riot in the stock market, seemingly unassailable and making money effortlessly, while the bears are licking their wounds.
Banks Once "Too Big To Fail" Now Even Bigger After Meltdown
Remember those banks that the federal government bailed out because they were "too big to fail?" Well...after mergers and bank takeovers (some encouraged by the government) those banks bailed out because they were "too big to fail" now are much bigger. JP Morgan Chase and Bank of America combined now control more than 20% of all bank deposits in the United States.
The better than expected US jobs data is likely to reinforce the view that the economy is stabilizing after a generational financial crisis. Some economists have even suggested that the economy will rebound strongly in the third quarter, with a surge in vehicle production. However, any fledging recovery could still be threatened by strong economic headwinds.