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The Stress Tests are Not Realistic

April 15, 2009

The stress tests have problems. The stress tests are no worse than what many economic forecasters fear. Also the administration has as much as said that all major banks will pass.

The PPIP must start a market for toxic assets and move them off of bank balance sheets.

Fr the banks , selling assets at prices below their current book values will force them to take writedowns, hurting profits.

If the government’s strategy is to make sure banks do not fail, banks have an incentive to sit the PPIP out and wait for more generous terms.

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