Bailouts

After Stress Tests, Are We Saved?

After the stress tests, the banks' shorftfall of $75 billion was better than expected, but “Under regulators’ worst-case assumptions, the 19 banks might suffer $600 billion in losses through 2010, on top of the hundreds of billions that have already vaporized in this financial crisis," writes The New York Times. "About 9 percent of all loans might sour—a figure that is even higher than it was during the Great Depression. One in five credit card loans could go unpaid, more than double the typical loss rate. Approximately one in 10 mortgages could sour.” The results likely mean that “bailouts for the banks are over,” but a recovery is contingent on the banks resuming lending and, accordingto Reuters, the results “are unlikely to spur a major pick-up in lending.” Demand remains low, and “While banks may be less hesitant to lend to each other if they feel their rivals' books have been credibly vetted, that does not translate into confidence to make new loans to small businesses and consumers.”