The post-stress test relief feels a little manufactured? You get the feeling that PR folks are in cahoots on this one: Inspire good feelings by spinning the results as grand confirmation that the industry is really in decent shape. Indeed, the $75 billion the top 19 banks must raise was less than most expected. If the economy has bottomed out, as many assume, the industry has little to fear. But in the back of our minds, we have to wonder: What if the economy doesn't recover as fast as many assume it will? What if the super bears are right? What if the worst case scenario is too rosy? It's possible folks.

There is no guarantee on the economic recovery. We're not far from a "worst-case" unemployment rate of 10.3 percent. While some banks seem to be in fine shape--Goldman Sachs and JPMorgan Chase--others may not be positioned to weather a significantly worse economy. In the stress tests' worst case scenario, "a staggering 26 percent" of Wells Fargo bank's card loans might turn nonperforming, notes the New York Times. At Morgan Stanley, commercial real estate losses might exceed 40 percent. Under the worst-case assumptions, the top 19 banks would suffer an additional $600 billion in losses through 2010. Presumably, the capital raising will allow them to weather the storm, but if the storm is much worse than expected, look out. 

For more:
- here's a New York Times article

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