The pace of layoffs slowed in April when employers cut 539,000 jobs, the fewest in six months. But the unemployment rate climbed to 8.9 percent, the highest since late 1983, as many businesses remain wary of hiring given all the economic uncertainties.
That 8.9% is already at the far limit of the bank stress test's worst-case scenario. Other weaknesses in the stress tests are laid bare by William Black (whom I've referenced in previous posts):
"It's in the interest of the financial community to send this propaganda out," Black says. "It's remarkable not that they do it but that it still works."
In other words, this isn't the first time we've been told "the crisis is over" and that "banks are well capitalized" - and probably won't be the last.
The professor and former financial regulator foresees another wave of foreclosures and future bank losses of more than $2.5 trillion vs. the government's $599 billion estimate.
This is no time to get happy, folks. When commercial mortgage defaults start hitting bank earnings in 3Q this year, a lot of fools buying bank stocks now will be very unhappy.
