Big Banks to be "Stress Tested"

More news on the regulation front. The Wall Street Journal is reporting that many banks will be subject to rigorous examinations to see if they are healthy enough to lend before they receive additional federal bailout funds. Federal regulators will likely require large banks to undergo a stress test to determine just how bad things could get in the worst case. The new oversight could take a step toward addressing longstanding disagreements among regulators about the health and viability of scores of institutions. Setting up a stress test could create a more objective set of standards and might also reveal the depths of the industry's problems. Keep in mind the theme that GlobalRiskJobs has been repeating for quite some time: regulation and reporting requirements will just keep getting stronger.

• Geithner will unveil the Obama Adminstration's bank rescue plan later today. He is expected to present a multi-faceted program to encourage financial institutions to lend again. A housing plan centering on mortgage modification and a "bad bank" public-private partnership will also be key areas. Bloomberg has a preview of the 11 am announcement.
  
• Nouriel Roubini had some strong words about regulation in the FT. He states that risk models fail because business lacks discipline to heed them, and thinks Basel II has failed even before being fully implemented.
  
• Also in WSJ, news of an emerging plan calling for issuers of pools of mortages to retain a slice of the securitization in order to keep some "skin in the game". Participants in the annual American Securitization Forum this week in Las Vegas are discussing different ways to buttress the market.
• The new SEC Chief pledged to crack down on fraud as she announced big changes at the commission. The WSJ thinks her central point has got it backward.
  
• Japanese corporate bond risk has risen to all time highs resulting from the pace of economic decline.
• We mentioned credit cards becoming a problem last week. NYT reports that private label cards are already showing signs of strain.
• Chris Hughes has some notes on the global nature of this credit crisis.
• DealBook reports that 8 big bank chief execs will descend on the Capitol via public transportation in order to get their public whipping from Barney Frank and the House Financial Services Committee.