Bank Stress Tests: Better Late than Never

(MoneyWatch)  At 2:00pm today, the Federal Reserve posted a "White Paper" detailing the stress tests it conducted for the nation's 19 largest banks. I was sort of hoping for a four or five page outline, but on a sunny Friday, I was forced to pore over a 21 page document, which tells me what I think we already knew: the Fed used this exercise as a means of telling us that they are on the case -- that they have their fingers on the pulse of the banks that collectively control two-thirds of the assets and more than half the loans in the U.S. banking system.

This is all scintillating news, to which I can only wonder: where were you two years ago? You know who you are... fearless Fed Chief Ben Bernanke, then-Treasury Secretary Hank Paulson and then-NY Fed Chief Tim Geithner. We sure could have used more oversight of our banking system then, before it really hit the fan. Instead, you were telling us that subprime was well-contained and that the little blip of Bear Stearns imploding was nothing with which we mortals need concern ourselves.

Doesn't that feel so long ago?

Ostensibly, the stress tests are supposed to help restore our confidence in the banking sector, but I know of only one way that can really happen: if, for once and for all, the banks could come clean and write down the junk on their balance sheets. It's not so hard -- Goldman and Morgan did it. Why can't the rest of them?

Ummm, maybe because if they did, everyone would know just how ugly the situation is, which is part of the reason that there is so much money on the sidelines right now.

But fear not, a bear market rally is upon us and that alone may be enough to bring in those poor hedgies, who will be forced to chase higher. Bear market rallies are notoriously difficult to navigate, which is why I love them so much. Hopeful bulls jump in at the wrong time and pessimistic bears find that higher prices can last longer than expected. What could be better than that kind of emotion amid massive government intervention?