“They’re very worried about the consumer. If we go into another recession, a lot of risk officers feel this is where the damage will be done.”-Paul Miller, former Federal Reserve Bank of Philadelphia, currently working for FBR Capital Markets

It appears the Federal Reserve is losing patience with the Too Big To Fail Banks (TBTFB). It’s questioning the TBTFBs’ desire to pay out huge dividends, and buy back their stocks.

“If the Fed fights back and disagrees and is more aggressive in their stance on cards and mortgages, it would mean banks wouldn’t be able to pay out as much.”-Glenn Schorr, Nomura Securities

Schorr says bank investors are almost demanding 50% to 60% earnings this year!

The problem is that the latest bank stress tests are conflicting with the TBTFB’s own financial claims.  The stress tests are designed to see if a bank has enough cash on hand to handle a sudden huge drop in the economy.

So far unnamed insiders, involved with analyzing the tests, say things aren’t looking good for banks.  When the variable of consumer debt is considered in the stress tests, some banks would suffer almost double the loses than their own in-house projections!

31 TBTFBs are currently undergoing the Federal Reserve stress test.