"We won't even refer to the Q1 results for C released this morning because, in our view, they really do not show the true condition of the bank nor the ultimate outcome that we expect to see with this institution. As of year-end 2008, C rated an "F" in the IRA Bank Monitor with a overall Stress Index score of 21 vs. the industry average of 1.8. As of the same date, JPM's Stress Index Score was 1.3.
Unfortunately, it is becoming increasingly clear that the Obama Administration lacks the courage to resolve C. Economic policy guru Larry Summers reportedly bought the "systemic risk" argument hook, line and sinker, but the fact remains that with relatively healthy banks like JPM pricing debt at +350 to the curve, the real issue facing financials is not simply capital adequacy as the stress tests suppose, but rather the broader issue of credibility as going concerns. Even were JPM or Goldman Sachs (NYSE:GS) to actually redeem the preferred capital provided by the Treasury TARP program, none of these banks could survive today without government guarantees for their debt."
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