Thursday, February 26, 2009

The Unintended Consequences of the Government "Stress Tests"

The government's "stress-test" of the nation's largest banks could end up discouraging lending as banks hoard cash to appear healthier to regulators, banking analysts say, Jeff Cox of CNBC correctly points out.

Further, as I have pointed out, the "stress test" is likely to give higher rankings for some assets versus others, thus creating pressure on some assets, as banks sell these assets to move into government "stress test" blessed securities and other assets.

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