The Pragmatic Capitalist has a good read on the assumptions built in to the bank Stress Tests. To summarize the absurdity: the WORST CASE scenario calls for 3rd Quarter GDP GROWTH. If that doesn’t say enough about the assumptions, it goes on to forecast a Q1 2010 unemployment and housing prices bottom.

The Pragmatic Capitalist’s seems much more realistic:

Try GDP bottoming in Q2 of  2010, unemployment peaking in Q4 of 2010 (11%+), and housing bottoming in 2013.   Of course, the government couldn’t use realistic assumptions like this because there is almost no chance the banks can survive such a scenario in their current state.

This is not the first time members of the Obama administration have been so rosy in their forecasts. The 2009 budget also had comparably bright worst-case outlooks for the year. While these manipulated numbers and unrealistic forecasts seem to have fooled the main stream media (and thus the general public) for now, its only a matter of time before these forecasts become obvious misleadings. To reiterate the absurdity, here’s a graph of the administration’s baseline forecast compared their assumed worst-case:

As previously mentioned, one of the assumptions is that unemployment will bottom in Q1 2010 at somewhere in between 9% and 10%. If the underlying GDP projections are incorrect (I can comfortably assume that they are) then the unemployment rate is going to be substantially higher during 2010 (I’m betting at least 12%). A higher unemployment rate will obviously have a big effect on foreclosure rates and credit delinquencies, and thus the viability of the firms under going the stress tests.

Its easy to see how these built in false assumptions only re-enforce the meaninglessness of these Bank Stress tests. They are nothing more than government propaganda bent on market manipulation. Lets just all hope the public wakes up and realizes it soon.