Fed to Stress Test 19 Banks Capital Against Recession Scenario- Bloomberg

The idea that the Federal Reserve can accurately forecast the financial results and capital ratios for these massive banks assuming an 8% decline in GDP, a 50% decrease in stocks, a 20% decrease in housing prices, and an unemployment rate of 13% is truly laughable.  There are just far too many inputs and projections to come to numbers that would be remotely helpful.  Keep in mind that the Fed can rarely accurately predict GDP, and was completely oblivious to the housing bubble and its potential ramifications for several years.  In my opinion it makes a lot more sense to work with the banks to clean up the financial system through more transparency, and clearly stated capital guidelines.  They need to understand that for banks to attract capital so that they can lend, their has to be the prospect of attractive returns.  While many analysts are trying to predict the markets reaction to this report, it is important for the investor to understand that it will take time for these businesses to recover, but dividends, share buybacks, and appreciation will likely come for those that are patient, and understand that volatility is often necessary for potential out-sized returns.

http://www.bloomberg.com/news/2012-03-12/federal-reserve-to-test-19-banks-capital-against-u-s-recession-scenario.html