That's far too low not just because banking companies will be forced to reveal bad paper they already have. As the economy struggles, new defaults occur every day even in prime-grade mortgages. House prices are still falling. Losses are soaring on credit-card debt and commercial real estate loans.
The critical question - for investors, consumers, workers, employers and policymakers - is how prepared banks are to absorb the next blows.
Switch genres to a disaster movie. We're in the flooding Red River Valley, piling up sandbags in the form of government capital injections for banks, ultra-low interest rates, relaxed accounting rules and public-private pools to buy toxic assets.
Is the levee high enough to handle a crest of $4 trillion, or whatever it turns out to be?
That's what the Federal Reserve's "stress test" for big banking companies is supposed to answer. But what officials have said hardly suggests that the examinations, expected to be finished by May 1, are rigorous or honest.
They're behind closed doors. The Fed has ordered banks not to disclose results, according to Bloomberg News. This week The New York Times reported: "Regulators say all 19 banks undergoing the exams will pass them."
So what's the point, except to continue the kind of dangerous puffery that began a decade ago with the analysts who rated Enron a "buy"?
Recent optimism, fueled in part by less-than-totally terrible reports from retailers and other sectors, got started with selective disclosures indicating bank losses were declining. Wells Fargo said it earned $3 billion in the first quarter even after writing off $3.3 billion more in bad paper.
But we haven't seen the whole picture from Wells Fargo or anybody else. Full reports won't arrive until later, and they'll be murky thanks to latitude in how banks value financial assets.
Optimists seem to believe Congress and the Fed are ready to deliver even more aid if banks need it. That's a risky assumption, given public anger over bailouts and the fact that the Fed itself is starting to look as overextended as the banks it's trying to rescue.
Even the Obama administration, the biggest optimist of all, admits banks will require more infusions. That alone says this flick ain't over.
