Widely derided as a racist crank, former internet talk-jock Hal Turner has seen his claim to having acquired a copy of the US bank stress test results met with scepticism.
His blog post saying the tests show 16 of the top 19 US banks to be insolvent was enthusiastically emailed across dealing rooms on Monday, adding to the sell-off in the financial sector which was first started by Bank of America’s figures. But the US Treasury quickly stepped in with a denial.
Yet Turner, for all his political extremism, doesn’t quite sound as though he is making things up.
He’s added a series of “corrections/clarifications” to his original post – such as stating that HSBC, while not a US bank under going stress-testing, is mentioned in his copy of the report because of its derivatives exposure.
Then there is this curious addition to the headline claim on insolvency:(Based upon the “alternative more adverse” scenario which had a 3.3 percent contraction of the U.S. Economy in 2009, accompanied by 8.9 percent unemployment, followed by 0.5 percent growth of the U.S. Economy but a 10.3 percent jobless in 2010.)
That’s not the stuff of stress tests. The OECD is already looking for a 4 per cent contraction is US GDP this year and zero growth in 2010, while unemployment is forecast to grow to 9.1 per cent in 2009 and then 10.3 per cent next year.
No matter. Turner now claims to have received a call from one John Polesi, an enforcement official at the SEC, who wanted to know whether the jock did indeed have a copy of what would be a “material document”:He then asked “If I send you a request for documents, will you send the report to me?” I replied, “Would the request be a Subpoena?” He responded “No” and then asked, “If the request did come in the form of a Subpoena, if I got the Commission to approve one, would you supply the document?” I responded “We would have to speak with our legal counsel first, but I suspect we would move to quash any such Subpoena.”
All very odd.
UPDATE: Okay, my excuse is that I was on holiday last week. The US Treasury “stress test” parameters are publicly available here. So the scandal here really is the use of the word “stress.” The tests on US banks really are simply mapping mainstream forecasts…
Related links:
Stress testing the stress test reports – FT Alphaville
Banks passing stress tests (but you’re not allowed to know about it) – FT Alphaville