I figured Citigroup (NYSE:C) would be asked to raise more cash to insulate it against further losses. But when I read that the Treasury will raise reserve requirements for all 19 banks subjected to the Treasury’s "stress tests," it suddenly made sense. 
As you know, I’ve explored a couple different stress test scenarios. In one, all banks pass the stress tests in order to convince investors that banks are healthy. In another, one or two banks are failed and made examples of, prompting the others to quickly get behind Geithner’s PPIP and dump their toxic assets at reasonable prices. 
I’m a little embarrassed that I didn’t see this outcome. After all, Geithner and the Obama administration have made it painfully clear that they prefer to play softball with Wall Street at the taxpayers’ expense. How could I have thought that any bank would be singled out and be made an example? 
And I suppose passing all the banks would have been a little obvious. But failing them all? That seems like the worst possible outcome … 
*****Now, to me, it seems unlikely that every bank really failed the stress tests. Given the governments penchant for making life as easy as possible for the big banks, I suspect we have a "safety in numbers" situation. By requiring all banks to increase their cash reserves, Geithner doesn’t have to single out the banks that truly have a problem. 
And Geithner even went so far as to say that, just because a bank raises cash, it doesn’t mean that investors should worry about that bank’s health. It’s nice of him to tell us what to think. 
Ultimately, Geithner’s schemes seem designed to make the banks either convert the government’s preferred stock from TARP into common stock and thereby meet higher reserve requirements, or sell toxic assets into the PPIP. 
All these complicated machinations designed to get banks on board with the Treasury and Fed miss the point – the government could simply tell the banks what to do. The fact that most in the Obama administration don’t makes one wonder who’s really in charge, Washington or Wall Street. 
*****The death toll from the swine flu is rising fast. Yesterday it was 103. Today it’s 149, all in Mexico. I’m seeing a lot of commentary that’s poking fun at the media for using words like "panic" and "pandemic" in regards to the swine flu. 
Of course panic never helps anything, but I take these animal borne flu strains seriously. It’s already spread to the United States, New Zealand, Israel and Canada. 
There are just 40 confirmed cases of swine flu so far in the U.S. And interestingly, the symptoms appear to be much less severe than those that have killed 149 people in Mexico. Let’s hope we’ve seen the worst.
Published by Wyatt Investment Research at