The bank stress tests may not only be misguided policy, critics say, but may actually conflict with two other key government initiatives to stabilize the financial system.

With the government set to release the official results Thursday afternoon following a steady stream of leaks to the news media, criticism of the stress tests is growing.

“This whole process has been a fiasco,” says banking analyst Bert Ely. “There are strongly different opinions on the conditions of these banks. This has aggravated it without necessarily settling anything. The majority of the sentiment in the market is that the stress tests results [will be] too optimistic.”

via Bank Stress Tests: ‘This Whole Process Has Been a Fiasco’ – Economy * US * News * Story – CNBC.com.

It’s a good article but all I can say is DUH.  I mean a government that invests in the likes of Fannie and Freddie, pushes a merger between Fiat (who?) and Chrysler while investing in the deal, and bails out all of Wall Street isn’t going to do a good job at financial analysis to begin with.  The author goes on to point out it may be a tool for the government to leverage banks (like BofA) to do their bidding (i.e. Fascism in Action) which I find more plausable then the stress tests carring any main street weight.  This is something for the suits in DC to get more power.

According to New York Times and Wall Street Journal reports, the government is expected to announce Thursday that the Charlotte, N.C.-based bank needs $34 billion in capital based on the results of its “stress tests” on 19 of the nation’s largest financial firms. The New York Times quoted a bank executive, while the Journal report cited unnamed people familiar with the situation.

The stress tests are being used to determine how banks would fare if economic conditions worsened. Any banks that are deemed to need more capital based on potential future losses will be required to address the capital situation immediately, to ensure they have the necessary protection if the economy worsens.

Banks will have an opportunity to raise the funds on their own before the government steps in to help support them.

For Bank of America, the $34 billion shortfall could be covered in multiple ways, including converting into common stock a portion of a $45 billion investment it received from the government as part of the Troubled Asset Relief Program. Bank of America has been among the hardest hit banks by the credit crisis and ongoing recession.

via Bank Of America Needs $34B In Capital ~ The Huffington Post.