Good question from Macroman

This is perhaps a naive question, but it's one that your author has not seen clearly elucidated elsewhere. What, exactly, is the purpose of the stress tests? It seems fairly obvious that they are not intended as a sober measure of how the banking system would fare under conditions of extreme economic stress. If they were, then the scenarios would offer a bit more choice than "Optimistic and Optimistic (Roubini version.)"
So what, then? Political cover to enable payback of the TARP and/or further injection of funds? To make everyone feel wonderful that the banking system is actually in pretty good shape? (Macro Man would normally scoff at this, but after the market action of the last few weeks, he's not so sure.) In a post-FASB, "say whatever you want" world, what possible purpose does this charade have? Macro Man is curious to hear your thoughts.

My thought is that the stress test are political cover - make it look like the Feds are doing something while they desperately try to buy time for the recovery spending to kick in. Problem is that the recovery $$$ is too little and too back-ended, the banking crisis too severe, and the stress tests not stressful (nor transparent) enough.

Anyone wonder how CNBC got leaked word that only one of the 19 banks will 'fail'? (Stress Test Shows One Weak Link Bank )