Stressed Out

Just when we thought we had heard the last about those bank stress tests, here they are again.

Yesterday, the five-member Congressional Oversight Panel overseeing the government's $700 billion financial bailout package voiced that it had some "serious concerns" about the bank stress tests conducted by the Treasury Department and the Federal Reserve.

Notably, the panel cited a lack of transparency in the process and the use of a scenario that has now proven not be "stressful" enough. Under the tests, the government created a scenario that painted a worst-case situation with the nation's economy. The aim was to see whether the nation's banks could withstand billions of dollars in additional write-offs. About half the banks tested passed. But here's the rub. The scenario posited by the government envisioned an unemployment rate topping out at 8.9 percent. Last week, the nation's jobless rate hit 9.4 percent -- with six months left to go in the year. As a result, the oversight panel said the Fed and Treasury should continue to conduct stress tests on banks as long as they have large amounts of toxic assets on their balance sheets.

Will the government heed that request? Well, today Treasury announced that 10 banks that passed their stress tests would be allowed to give back their TARP funds. The government has decreed that these 10 banks now have enough capital to withstand another severe economic jolt. Stay tuned.