How to Profit From the 10 Biggest Wall Street Lies of 2009

#1 The Stress Tests Provided Transparency in the Banks

“The effect of this capital assessment will be to help replace uncertainty with transparency. … We chose a strategy to lift the fog of
uncertainty over bank balance sheets and to help ensure that the major banks, individually and collectively, had the capital to continue lending
even in a worse-than-expected recession.” Treasury Secretary Timothy Geithner, May 2009

These tests did NOT bring transparency to the banking sector. They were practically designed to prove the banks were fine, and simply ignored
off-balance-sheet and other dodgy assets. It was as if they were saying, “We will do whatever it takes (even lie) to make sure the big banks do not
fail since Congress won’t give us more money to fix them.”

Since this “new wave of transparency,” the banks have only raised a small portion of the capital they really need. What’s more, the “worse-than-expected
recession” Geithner spoke of assumed 8.4% unemployment. We are now looking at 10%.

Lesson for investors in 2010: The banking system is still, by historical norms, insolvent, led by big money-center banks such as
Citigroup (C) and Wells Fargo (WFC).

Next: #2 New Accounting Rules Show Banks Are All Right