Rigging the system to protect banks

Wells Fargo posted a $3.8 billion profit in Q1 of 2009, despite needing $15 billion in TARP funds. Surprisingly, not a single major bank failed the vaunted stress tests by the Department of Treasury. 

You would think that the world has found order and peace once again.

You would be wrong.

Piecing together the Department of Treasury and Federal Reserve strategy to prevent the collapse of the financial system and protect the American taxpayer, it now seems clear the intentions of the Obama Administration. Talk up the strength of the banking system with positive news so banking stock prices will increase. As we have seen in the last month, every TARP receiving major bank saw their stock price double or triple. 

The positive news has allowed private banks to issue a total of $32 billion of common stock since the stress test results were released. 

Read here the $8.8 trillion Wells Fargo raised in it's common stock release.

It is my prediction that these fallacious earnings reports and stress tests will only create a bubble of higher stock prices, but earnings will fall by the end of the year when housing prices continue to fall and unemployment reaches double digits.