Regulators shift gears to focus on loan quality

As bank stress tests for "The 19" evolve, regulators are increasingly focused on loan quality, given the big disparity they are finding in underwriting standards at the banks. Subsequent to their initial due diligence, the feds have determined that lending practices have to be given at least as much weight as macro-economic scenarios in determining individual bank health. This is an important development because it makes it easier to separate vulnerabilities caused by bad management from those caused by factors beyond management's control. This criteria gives Geithner more leverage to make management changes at any banks coming back for more TARP cash.