Transcripts

"Two Ways to Play"-"Minyanville's" Kevin Depew

SUZANNE PRATT: From capital raising efforts to banks too big to fail, tonight's "Two Ways to Play" takes on the bank stress tests. Here's Kevin Depew of "Minyanville" and "Minyanville's" Kevin Depew.

KEVIN DEPEW, EXECUTIVE EDITOR, MINYANVILLE.COM: You know, this week looks like we finally may get a little clarity when the government reports the results of stress tests on banks. I know, before you even say it, these tests are just another gimmick. But here's my take. With the Troubled Asset Relief Program now down to only $100 billion of the original $700 billion, these tests are a way for the government to say banks are OK, but still need more capital. The thing is, we're past the point of whether bailouts are right or wrong, so this lays the groundwork for getting banks the capital they need. Incredibly, for once, you may be partially correct. The tests are a scam, but scams only work when somebody is being fooled. And in this case, no one is. I even agree with you that banks need more capital. Unfortunately, the cure being proposed based on these tests isn't more capital. It's converting preferred stock to common stock, nothing but financial alchemy, an accounting trick. Regardless, the real problem is this: what difference does it make whether banks pass or fail a so-called stress test when the government isn't allowing banks to fail in the first place?