Stress Test Recap: The Game Was Rigged

Last Updated Jul 23, 2010 1:17 PM EDT

The results of the European bank stress tests are in and at first glance, the numbers look better than expected, leading some to consider whether everything's coming up roses for markets.

7 of 91 European banks failed the stress tests with an overall capital shortfall of 3.5 billion euros ($4.5 billion). Coming into the day, it was expected that 10 banks would fail.

Investor reaction was muted for a good reason: the tests were rigged! The CEBS stress tests didn't include a risk that many believe still persists: that of a sovereign default. How would these banks do if a country like Greece defaulted? Perhaps we'll never have to know, but when the game is rigged for a specific outcome, it sure is tough to trust the box score.

Image by Flickr User Swami Stream, CC 2.0
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    Jill Schlesinger, CFP®, is the Editor-at-Large for CBS MoneyWatch. She covers the economy, markets, investing or anything else with a dollar sign. Prior to the launch of MoneyWatch in 2009, Jill was the chief investment officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.



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