NHK Mistranslates IAEA Remarks and Says "NISA's Stress Test Evaluation Conforms to International Standard"

NHK reports on the findings of the IAEA during the visit this time to evaluate whether the "stress test" carried out by electric power companies and overseen by Japan's Nuclear and Industrial Safety Agency was appropriate, particularly in the case of Ooi Nuclear Power Plant.

This is what the IAEA mission chief said, as you can see and hear in the accompanying video to the news:

We found that the NISA's approach is generally consistent with the IAEA's safety standards, and the international practice.

NHK translated the remark as:

ストレステストの評価方法はIAEAおよび国際基準に適合している

which would translate back into English as:

The way [NISA] evaluate the result of the stress test conforms to the IAEA and international standards.

As if there are international standards for stress test evaluation. (Or are there?)

Japanese Twitterers who understand English immediately tweeted the incorrect translation by NHK. NHK has quickly added a paragraph to supposedly "clarify" but it is still wrong. It now translates the remark by the IAEA mission chief Lyons as:

原子力安全・保安院の審査の過程は、ＩＡＥＡのルールに適合していて、ヨーロッパなどでの国際的な活動にも即している

which is:

NISA's evaluation process conforms to the IAEA rules, and in line with the international activities in Europe and other places.

Ummm. Nowhere the IAEA chief said anything about Europe. What activities? And he said "standards" not rules.

(Now I'm suddenly flooded with the memory of just atrocious translation that NHK did in the early days of the nuclear crisis in March last year. All these simultaneous translators that NHK World paid a fortune who didn't have a clue what they were translating. Ugghhh.)

I copied and pasted the NHK News for the record. Nothing much in it other than NHK's mistranslation. It basically says the IAEA rubber-stamped what the Japanese government did, again, with a friendly advice to make it as if the IAEA actually did something. What's the advice you ask? "You'd better learn how to explain to the local residents better."

Now the illusion must be totally expelled from the minds of Japanese people who cling to the idea that an "international" organization is somehow "neutral" and therefore will scold their government into the right direction.

NHK News (1/31/2012 12:07PM):

ＩＡＥＡ 評価方法は国際基準適合

原子力発電所の運転再開の判断の前提となる「ストレステスト」について検証してきたＩＡＥＡ＝国際原子力機関の調査団は、国の原子力安全・保安院に報告書を提出し、「評価の方法は国際的な基準に適合している」とした一方で、原発の地元自治体などにさらに説明をすべきだといった改善点を指摘しました。

ＩＡＥＡの調査団のジェームズ・ライオンズ団長は、東京の原子力安全・保安院を訪れ、深野弘行院長に報告書を手渡しました。調査団の１０人は、今月２２日に来日し、電力会社が行った「ストレステスト」に対し、保安院が国の規制機関として適切に評価をしているかを検証するため、保安院の聞き取りや、福井県にある関西電力の大飯原発で視察をしてきました。報告書では、保安院が原発の現地調査をしたり、評価の過程を公開したりしている点を挙げて、「評価の方法は、国際的な基準に適合している」と結論づけました。その一方で、原発の地元自治体などにさらに説明をすべきだといった１１の改善点を指摘しました。保安院は、大飯原発の３号機と４号機について、「テストの方法は妥当だ」と評価していて、ＩＡＥＡの報告書を踏まえ、来月、最終評価を取りまとめることにしていますが、原発の運転再開は地元に慎重な意見が少なくなく、具体的な見通しは立っていません。

(The audiovisual news that accompanies the article ends there.)

記者会見をしたＩＡＥＡの調査団のジェームズ・ライオンズ団長は、「原子力安全・保安院の審査の過程は、ＩＡＥＡのルールに適合していて、ヨーロッパなどでの国際的な活動にも即している」と述べたうえで、「保安院の電力会社などへの指示は、もっと具体的にするべきだ」と指摘しました。

And then, strangely, NHK has another paragraph of the pugnacious mayor of Osaka who looks like a kindergarten bully and acts like one commenting on the NISA's stress test and the IAEA mission.

What does he have to do with anything? The only thing I can think of is that somehow this Osaka mayor, who was the governor of Osaka, full of ambition for the national politics, managed to butt himself in on the news to give an impression that he was some politician for everyone in Japan to pay attention and listen to.

大阪市の橋下市長は、原発の施設の安全性については専門家しか判断できないとする一方で、「今、何が問題かと言えば、施設だけではなく、政府や電力会社の『組織』が問題となっている。ストレステストをやるのなら、施設だけではなく、組織が本当に機能しているのかどうかをテストすべきだ。ＳＰＥＥＤＩのデータをすぐに出すという決断をできないのが今の政府だ。施設が安全でも、それを扱う側の政府や電力会社の組織が、非常時に機能するのかどうかについて、ストレステストをやらないと全然納得できない」と述べ、政府や電力会社の組織としての在り方を検証すべきだという考えを示しました。

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Wall Street Journal: "IAEA Says Japan Alone Should Decide on Reactors"

The head of the delegation from the International Atomic Energy Agency (IAEA) currently visiting Japan has said Japan alone should decide whether to restart the reactors in Japan after the "stress test". The IAEA is to examine the ways the "stress test" has been carried out, and to visit two nuclear power plants whose "stress tests" have been "successfully" concluded.

My guess: A ringing endorsement of the way the "stress test" have been done by the Japanese government, with a few pieces of kindly advice on how to further improve.

There are still Japanese citizens who think IAEA will somehow rein in the Japanese government's drive to re-start the nuclear power plants despite stiff citizen-level oppositions. Sorry. And wake up.

Wall Street Journal has a rather disjointed article on the IAEA mission in Japan this time, with the first one-third of the article dedicated to analyzing the trend on tweets in Japan regarding the danger of a big earthquake in the Kanto region and the last one-third dedicated to disaster preparedness of municipalities within 30-kilometers of any nuclear power plants.

(Never mind that radioactive materials from the Fukushima I Nuclear Power Plant accident have significantly contaminated areas that are more than 200 kilometers away, and the government is still thinking in concentric circles...)

From Wall Street Journal English (1/23/2012):

IAEA Says Japan Alone Should Decide on Reactors

By MITSURU OBE

TOKYO—The International Atomic Energy Agency on Monday began a mission to help identify gaps in Japan's safety-check procedure for nuclear plants, to boost reactor resilience to natural disasters, as Tokyo began drawing up emergency plans with local governments.

Underscoring the risks facing Japan, a new research institute investigation has determined there is a 70% chance of a magnitude-7 earthquake striking the Tokyo metropolitan area within the next four years, and 98% over 30 years. The March 2011 earthquake was a magnitude-9.

The latest prediction surprised residents, and grabbed headlines in the local media. The government's forecast, using a different methodology, has been that there is a 70% chance of a magnitude-7 quake hitting Tokyo over the next 30 years.

The term "within four years" began trending on Twitter early in the day, with users saying that while the threat of the big one hovered in the back of their minds, the new calculation has made them more aware of the need to make emergency preparations.

The IAEA mission was dispatched in response to Japan's request to evaluate the methodology of its stress-test safety checks now being implemented on idled reactors. By offering to put itself under international scrutiny, Japan hopes to regain public trust in its safety procedures and bring about an eventual restart of nuclear reactors.

So far, Japan's efforts to regain public support for restarting the reactors has made little headway, with 49 out of the nation's 54 reactors currently offline. By May, those last five will be required to close for maintenance.

The head of the IAEA mission, James Lyons, said a decision on whether to restart Japan's idled nuclear reactors is solely up to the Japanese government.

"We will not be focusing on whether or not it is acceptable to restart any given plant. That is fully the responsibility of the Japanese government," said Lyons, director of the IAEA's nuclear-installation safety division and a former official with the U.S. Nuclear Regulatory Commission, at a news conference.

Mr. Lyons said the mission will focus on a number of areas in examining the government's stress tests, including severe accident procedures, extreme external events and loss of off-site power supply.

During their nine-day stay through Jan. 31, the IAEA's team of 10 experts will visit two reactors that have recently been certified as safe by Japanese regulators to evaluate whether the checks address all potential risks.

On Monday, the Japanese government asked local authorities within a 30-km radius of nuclear plants to draw up emergency-response plans to possible nuclear disasters.

Such plans have been required only for local governments within an 8-10 kilometer (5-6 mile) radius, but the government has decided that emergency plans should be made for much wider areas in the aftermath of the Fukushima Daiichi nuclear disaster, which was triggered by the March 11 earthquake and tsunami.

The government also is requesting that plans for major natural disasters be far more specific, detailing the methods of evacuation, distribution of iodine pills for radiation exposure, securing of communication channels and deployment of radiation-monitoring posts.

"The March nuclear disaster has exposed serious flaws in communication between the central and local governments," said Goshi Hosono, minister in charge of nuclear disasters, referring to the failure to alert local communities on the spread of radiation plumes from the Fukushima Daiichi plant in the early days of the 2011 crisis.

Meanwhile, Prof. Naoshi Hirata, of Tokyo University's Earthquake Research Institute, said the March earthquake apparently has increased the chances of major quakes striking the Tokyo metropolitan area over the next four years.

There is a correlation between the number of small quakes and that of large quakes, according to Prof. Hirata. A recent jump in the number of small jolts around Tokyo indicates the chance of a large quake has also increased, he said.

"The balance has changed since March 11," added Shinichi Sakai, a research associate at the institute. He said that pinpointing the exact location of any pending temblor is impossible, but that researchers will attempt to narrow down field of possibilities and revise scenarios of what might occur in the new time frame.
—Yoree Koh contributed to this article.

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Slow and Rude Awakening of Japanese Citizens Over the Nuclear Crisis

They are nowhere near the majority ( who eat any food and go anywhere without a single worry about radiation contamination), probably not even 10% of the population. But thanks to the net and particularly the social media like Twitter, the Japanese people now have a direct tool to observe how the officialdom works, firsthand.

The most recent case in point happened yesterday, over the so-called "public hearing" held by the Nuclear and Industrial Safety Agency under the Ministry of Economy, Trade and Industry. The public hearing was about the approval of the result of the so-called stress test of one of the nuclear power plants operated by Kansai Electric Power Company (Ooi Nuclear Power Plant in Fukui Prefecture, in the so-called "Nuclear Ginza").

NISA and the Ministry clearly thought it was conducting a routine "public hearing" where the experts would rubber-stamp the conclusion already reached by the Agency which is staffed with employees from companies in the nuclear industry on temporary assignments and where the public, if any were there, were supposed to sit there quietly to observe the proceedings. Yesterday, NISA was to ascertain the safety of the Ooi Nuke Plant, paving the way for the re-start, and was expecting a smooth sailing. It did ascertain, but it was decidedly not a smooth sailing.

The citizens who went to the public hearing didn't want to just sit and listen, and sensing trouble the NISA quickly moved to close off the meeting, telling the citizens to watch the proceedings on a monitor in a separate room. When the citizens said no, and didn't obey NISA's order to stay in the separate room and entered the conference room, the Agency called in the police.

Then the order apparently quickly went to the media to report the incident as it was happening and paint the protesters as lawless and rude. Here's one typical report by Nippon Television News (1/18/2012); just about every sentence is incorrect:

１８日夕方、経産省の原子力安全・保安院の協議に反原発派の団体が乱入し、警察が出動する騒ぎとなっている。

An anti-nuclear group has forced its way into a meeting held at the Nuclear and Industrial Safety Agency under METI, and the police has been called in.

　保安院は１８日、大飯原発（福井・おおい町）３・４号機の運転再開の判断の前提となるストレステストの妥当性について話し合い、全国で初めて「妥当」とする判断を示す予定だった。しかし、反原発を掲げる市民団体らが別室に設けられた傍聴席から会議室になだれ込んで協議を妨害したことから、経産省は警察の出動を要請したという。

The NISA was expected on January 18 to discuss the appropriateness of the stress test that would be used to determine whether to re-start the Reactors 3 and 4 at Ooi Nuclear Power Plant (Ooi, Fukui Prefecture) and to declare it would be "appropriate" to re-start the plant. However, the citizens' groups who were against nuclear power plants barged in to the conference room from the separate room set aside for the public [to monitor the proceedings] and disrupted the proceedings, so the Ministry of Economy, Trade and Industry called the police.

　警視庁によると、市民団体らは建物内で座り込みを続けている。

According to the police, the citizens' groups are doing the sit-in inside the building.

The reality was:

• It was not an organized "group" of anti-nuke protesters but a bunch of citizens, including people from Fukushima Prefecture who were exercising their right as citizens to participate in a "public hearing";

• They lined up and obtained the tickets to participate in the hearing;

• The meeting was open to public, but the NISA decided to move the public to a separate location to avoid interruption;

• They didn't barge in violently as portrayed by the MSM, didn't interrupt the proceedings, but they were asking questions as concerned citizens.

And how do we know that? Because an independent media (IWJ) was net-casting the whole thing live, and people were tweeting, watching the netcast live.

Minister of Economy, Trade and Industry Yukio Edano, whose refrain as the chief cabinet secretary was "There is no immediate effect from radiation" (he now says he only meant for a couple of days or weeks at most), called the citizen's behavior "unacceptable" and said that "some of the commissioners are being forced to remain in the room". How dare the lowly citizens interrupt the government scientific proceedings beyond their comprehension?

Two commissioners left the meeting in protest when the NISA did hold the meeting 4 hours later in a separate room shutting out the citizens entirely.

As Sankei Shinbun (1/18/2011) reports:

関西電力大飯原発のストレステスト（耐性検査）に関する経済産業省原子力安全・保安院の専門家会議の委員のうち、井野博満東京大名誉教授ら２人は１８日、保安院が傍聴を認めずに会議を開催したことに抗議し、会議を欠席した。

Two commissioners on the Nuclear and Industrial Safety Agency's expert panel to assess the stress test conducted on Ooi Nuclear Power Plant operated by Kansai Electric Power Company left the meeting in protest. Hiromitsu Ino, professor emeritus at Tokyo University and another commissioner protested against the NISA's decision to hold the meeting without the public attending.

　井野氏は「保安院は（傍聴を認めないのは）前回の会合で不規則発言があったためというが、議事が数分遅れた程度。そんなことを理由に傍聴者を排除するのはおかしい」と強調。

Ino emphatically said, "The reason for NISA not to allow the public to attend the meeting was supposedly some irregular remarks [from the public] in the previous meeting. But that only delayed the proceedings by a few minutes. It is absurd to exclude the public for such a flimsy reason."

　元原子力プラント設計技術者の後藤政志委員も「国会でもヤジは飛ぶ。そんなことも許容できないなら保安院はさらに信頼を失うだろう。傍聴者を締め出し、密室でやるような議論には参加できない」と述べた。

Commissioner Masashi Goto, a former nuclear power plant engineer, said "You get heckled in the Diet. If NISA cannot tolerate such a minor thing, the agency will further lose credibility. I cannot participate in a meeting behind closed doors where the public is shut out."

　井野氏は、保安院が大飯原発のテスト評価を妥当としたことに対し「総合的安全評価というが、ほんの一部の評価をしただけだ」と批判した。

Ino also criticized the decision by NISA that the stress test for Ooi Nuke Plant was appropriate. "They say it was a comprehensible safety evaluation, when in reality only a small portion was evaluated."

Professor Ino is the one who said the other day that a Containment Vessel at Fukushima II (Daini) Nuclear Power Plant was broken from the March 11 earthquake.

Some on Twitter are still incredulous that the police was on the government's side, not on the citizens' side. Other long-held beliefs in a trust-based society that have been shattered, at least for a portion of the population, since March 11, 2011 include:

• The government of all levels, from national to municipal to an unofficial unit of "self-governing" neighborhood association, exist to protect citizens;

• The government officials don't lie, for the most part;

• Producers and distributors are honest, caring about the safety and quality of the products that they produce and sell;

• Food in Japan is safe, and the government will make sure it remains that way;
  

• The police is there to protect citizens;

• Public hearing means the public get to voice their opinions;

• They can trust the experts because they are from prominent academic institutions in the country;

• They can trust the politicians because they are from prominent academic institutions in the country;

• They can trust school teachers because they are from prominent academic institutions in the country;
  

• If it is reported in the mass media, it must be true;

• Nuclear power plants are safe.

• and on and on and on...
  

The list is endless and still growing. Too bad it took one of the worst nuclear accidents in history for the citizens to realize they've been had.

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Today's Nuclear Safety Commission Meeting Has a Noisy Audience

(Update) It's unreal. The commission members continue the meeting, totally ignoring the questions from the audience who want Tomari Nuke Plant stopped and inspected properly. At one point, the commission head, Haruki "Detarame" Madarame declared the meeting over.

------------------------------------------

It looks like something very unusual is happening. There are a lot of people attending the Nuclear Safety Commission's meeting on August 11 which is open to public, and they are shouting at the commissioners.

The NSC is discussing the nuclear power plant maintenance schedule. Why is it an issue that attract so many people? It's because of one nuclear power plant in Hokkaido that has been "testing" the reactor for over 5 months after the regular maintenance was over.

Even though the "testing" is done on a full, commercial scale, Hokkaido Electric Power who owns the plant, Tomari Nuclear Power Plant, is calling it "testing" so that they can continue to generate power without going through the so-called "stress test".

The NSC meeting today is supposed to endorse the re-start of "commercial" operation of the reactor without the stress test, and that's what people who fill the room are upset about.

But shouting down the commissioners? And apparently the commissioners don't even try to rein in the crowd, as one reporter tweets "guilty conscience, maybe?"

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Kyushu Electric: Emails Sent to 2,300 Employees at Subsidiaries

More on Kyushu Electric Power Company busted (thanks to the Internet) for urging its employees and the employees at its subsidiaries to stuff the hearing for the re-start of Genkai Nuke Plant in Saga Prefecture with "anonymous, pro-nuke" emails.

According to Kyodo News Japanese (7/8/2011), A "Bucho" (general manager of a division) at Kyushu Electric ordered a "Kacho" (junior manager who work under "Bucho") to send emails urging the subsidiaries to participate in the hearing as anonymous pro-nuke citizens. 4 managers at the 4 subsidiaries dutifully forwarded the email to everyone at their respective companies, total 2,300 emails to 2,300 employees.

4 managers at the subsidiaries are all from Kyushu Electric. The "bucho" who ordered the "kacho" to create this email didn't say whether he also specified the details.

As the result of this scandal, even the pro-nuke gung-ho mayor of Genkai-cho (where the nuke plant sits) has grudgingly withdrawn his consent for the re-start, trashing both Kyushu Electric and the national government, who out of the blue has come up with the brilliant idea of nuke plant "stress test" that will not only delay the re-start at best, and at worst may reveal the aging Genkai plant to be very unsafe (if they really test).

But would anyone who believe the test, when the test parameters are set by the NISA and the nuclear industry?

Well, sadly it may well work. Just like the "stress test" for Wall Street banks devised by the US regulators (Turbo Tax Timmy and Helicopter Ben) and the banks themselves seems to have worked. Not that anyone believed the result, but more like "OK it's done, they cheated again, what's next? Anything changed? No. So what? Let's move on. Oh American Idol is on!" And the declaration by the banks and the regulators that "the US banks are safe".

Another minor victory for no-nuke people in Japan is that Banri Kaieda, Minister of Economy, Trade and Industry who amassed a fortune selling books on how to invest in risky assets right before the Japan's asset bubble collapsed, may be resigning over this Kyushu Electric scandal.

He feigned surprise and indignation, but hardly anyone believes he didn't have a hand in it. But just like his boss PM Kan, resignation "when the time comes" may mean he will never resign because no one knows "when" the time will come and what he means by "the time".

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#Fukushima I Nuke Accident: EU's "Stress Test" For Nuclear Reactors Just like US's "Stress Test" for Wall Street Banks

To "learn" from the Fukushima I Nuke Plant accident, as the IAEA is to recommend, no doubt, the EU is going to conduct the "stress test" for the 143 reactors in Europe to see how Europe's nuclear facilities are able to withstand natural or man-made disasters.

Caveat?

The test is voluntary, and as one German MEP (member of European Parliament) contends, the check is "largely in the hands of operators".

Sound familiar?

It's just like the so-called "stress test" devised by the US Treasury Department and the Federal Reserve to assure the world that the US banking system was safe and sound, in the wake of September-November 2008's financial disaster that crashed the financial markets and triggered the worldwide recession. The "test" was not "voluntary" but the Treasury and the Fed handpicked which banks to do the "test". The banks knew exactly what they would be tested for, because for the most part they were the ones who told the regulators what parameters to test.

That should be very familiar to the Japanese, too. In Japan, at least in the past, when the fire department or the public health department conducted safety checks on the public facilities (hotels, restaurants, etc.) they used to "warn" those facilities days in advance about the inspection date and what to inspect.

Globalization is truly here.

From BBC News (6/9/2011):

MEPs split over nuclear 'stress tests'

MEPs have clashed over plans for "stress tests", which are due to be carried out on nuclear facilities in the EU.

There were angry scenes during the Commission statement on 9 June 2011, which caused Energy Commissioner Gunther Oettinger to appeal for calm.

Mr Oettinger was outlining plans for the tests - ordered in the wake of Japan's Fukushima disaster - which are designed to see how Europe's nuclear facilities are able to withstand natural or man-made disasters.

The so-called stress tests will be performed on Europe's 143 working reactors and other atomic installations and will consider a range of factors, including seismic activity, flooding, and power loss at reactors.

But German Green MEP Rebecca Harms dismissed the plans as a "paper check" designed to "downplay the risks of nuclear power".

Ms Harms attacked the voluntary nature of the tests, saying it left the checks "largely in the hands of operators".

Her comments were dismissed by fellow German MEP Herbert Reul, who described Ms Harms' opinion as "naïve".

Mr Reul praised the commissioner, saying that although the plans were "not 100% what we wanted", they would not be improved by other MEPs "complaining and harking on about it".

British conservative Giles Chichester protested about the "internal German discussion", and asked MEPs to focus on "the European issue".

Germany has recently announced that all of its nuclear power plants will be phased out by 2022, becoming the biggest industrial power to give up nuclear energy.

However Germany's nuclear industry has argued that an early shutdown would be hugely damaging to the country's industrial base.

Meanwhile countries including the UK, France and Poland have all announced further development of nuclear energy.

I wonder if there's an equivalent of "Saturday Night Live" in Europe. I hope they will make a wonderful spoof of this nuke plant "stress test", much like the SNL spoof on Geithner's "stress test" for banks. In case you missed that SNL skit from 2009, here it is.

(h/t Robbie001 for BBC News)

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Stress Test Jr. to Further Shore Up CONfidence Is a Rigged Game

in which TBTF banks came up with the answers AND the questions.

From Pro Publica's Jessie Eisinger (3/2/2011) [emphasis is mine]:

A Test Where the Banks Had the Questions and the Answers

Later this month, the Federal Reserve is going to let banks know how they did on its most recent round of “stress tests.”

Banks are eager to bring doctors’ notes to their meetings with investors, displaying their bills of health. They want regulators to allow them to start paying, or increasing, dividends to investors or to initiate stock buyback programs.

This set of exams, announced in November, is Son of Stress Test 2009, a follow-up to the tests the Fed conducted in the wake of the financial crisis.

But something seems different this time around. It’s almost as if the banks knew their results, even before the testing was complete.

Since the end of last year, banks have been bragging about their rude health. Bank of America’s chief executive, Brian T. Moynihan, suggested that the bank would raise its dividend above its current token amount. Jamie Dimon, JPMorgan Chase’s leader, did the same. Warren E. Buffett suggested in his shareholder letter that Wells Fargo was about to pass with flying colors.

Of course, banks ought to have a good idea of the results. They came up with the questions — and the answers.

The Fed gave the banks one economic assumption — a recession — to test their books against, but otherwise the measures were chosen by banks themselves. The Fed just vetted them. Seems like a low bar.

“It’s a take-home exam where you supply the math and then it’s pass/fail,” said Joshua Rosner, an analyst with the independent research firm Graham-Fisher & Company.

Though the Fed isn’t labeling these exams an official banking system stress test, it could be every bit as consequential. Just as the 2009 tests required some banks to raise money — and the most fragile improved their capital to the tune of about $77 billion — this Stress Test Lite could allow some banks to slough off capital.

Unfortunately, declarations of banking system vigor seem premature. Housing has resumed its fall, and many analysts expect national prices to fall on average this year. Commercial real estate is a looming problem. Unemployment remains obdurately high.

In 2009, critics complained that the stress tests were driven by appearances and that the government’s true, and thinly disguised, goal was to shore up confidence in the markets. The conclusion — that, over all, the system was sound — was inevitable.

“The stress tests were designed to reassure the capital markets that the government was not going to restructure the banks,” said Damon A. Silvers, who serves on the Congressional Oversight Panel, which monitors the Troubled Asset Relief Program. “But the capital raises compared to the problem assets were not that big.”

In the first round, the Fed disclosed the economic assumptions, a baseline and an “adverse” situation, which the banks had to test against. (In that event, even the adverse situation for 2009 wasn’t as dire as reality.)

Unfortunately, the central bank didn’t disclose enough information to actually judge the results. The Congressional Oversight Panel enlisted two University of California, Berkeley professors who specialized in banking and risk assessment to judge the tests. They had to throw up their hands.

The two “were interpreting shapes on the wall,” said Eric Talley, a professor of law at Berkeley, who worked on the project. “We couldn’t see what the shapes were, so had to look at residue to see if those were the shapes you would normally want to use.”

This time, the Fed hasn’t made even that cursory amount of criteria public.

The first round of tests was based on self-reported data of asset quality and loss estimates. This time around, that weakness is squared. Now the banks are reporting on their own internal capital plans based on their own asset assessment.

“It could be that banks have been really assiduous about own risk portfolios,” Professor Talley said. “Or it could be that too much control over the process has been handed over to banks. It’s hard to tell.”

While the Fed got hammered by critics who assailed the tests as too deferential to the banks, the central bank was doing something unprecedented and holding the banks to what it viewed as a solid capital standard.

Inevitably, though privately, banks screamed to the regulators about how harsh they were. They were reluctant to do so publicly because we were still in that fleeting period when bankers displayed a modicum of chagrin for the debacle they had caused. That moment has passed.

It would be alarming if the regulators had internalized their complaints. The operating theory of supervision from the Treasury secretary, Timothy F. Geithner, and the banking regulators continues to hold: we can push banks to restructure, without forcing them. Banks can be made to raise capital and reduce their risky activities, largely through encouragement and moral suasion. They can please shareholders and be safe at the same time.

We had better hope that the banks actually are healthy. The banks say ‘Trust us,’ and the Fed is doing just that.

Well, "hope" is a dirty word now. (You can thank Obama.)

Even the "pass/fail" is too discriminatory, isn't it?

Can't wait to see the spin on the government-controlled channels when the results are announced.

Here's SNL video on the 1st stress test. Ah, fond memories...

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Federal Reserve Orders Another "Stress Tests" for Banks

That should restore full CONfidence in the market, I'm sure.

AP reports:

WASHINGTON (AP) -- The nation's largest banks must undergo new stress tests to show they can weather another recession, and the Federal Reserve said those that pass them can boost dividends paid to investors.

Banks would need to show the Fed's bank examiners that they're in good financial health and that they have adequate capital to absorb potential losses over the next two years.

... All of the 19 largest banks overseen by the Fed must file the plans -- even if they don't intend to increase their dividend payments. The plans must be filed by Jan. 7, 2011.

The upcoming round of "stress tests" are a key part of the Fed's ongoing efforts to make sure that banks -- and the entire financial system -- are stable. The safety and soundness of the banking system is an important ingredient to the economy's health.

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European "Stress Test" to Mark Down Sovereign Debt

It's funny to see Europeans feigning to take their "stress test" seriously, despite Timmy Geithner's numerous visits to Europe telling them all they need to do is what he did in the US, a sham of a test - neither "stress" or "test" - to restore CONfidence.

But are Europeans really saying thanks Timmy but no thanks, and actually planning to put some "stress" in the test?

Reuters reports:

"FRANKFURT/BRUSSELS (Reuters) - Stress tests on European banks need to mark down the value of Greek government debt by about 16 percent, sources said, as regulators haggled over how much detail to reveal about the health checks.

"... Two German banking sources said a haircut of 16 to 17 percent off the market price would be applied to Greek debt. Greece's 10-year bonds are trading at about 75 percent of their par value at present.

"No haircut would be applied to German sovereign bonds, the sources said, and a 0.7 percent markdown would be applied to French sovereign bonds, one of the sources said.

"Sovereign bonds of Portugal, Spain, Italy and Ireland would see more significant markdowns, the sources said.

"A 3 percent loss will be applied to Spanish bonds, Bloomberg reported." [Emphasis is mine. The article continues.]

Hmmm. Greek sovereign debt is already trading at 25% haircut, and the "stress test" will only do 16% haircut. Maybe not much of a "stress" after all. And 3% for Spanish bonds? There you go, that's more like Geithner's stress test...

For a moment I thought Europeans were serious.

JPMorgan thinks it's a joke, and Reggie Middleton has this eloquently titled article on his Boom Bust Blog: "Greece Starts to Restructure in Real Time, Exactly As We Predicted – Rendering EU Stress Tests As Credible As Platinum Laced Frog Farts".

Hahahahahahahahahaha ........ (whatever that means, it sure doesn't sound credible.)

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The Real Stress Test, SNL version

We could use a good laugh in this uncertain market. Here's from Saturday Night Live, on the stress test results of the nation's 19 banks.

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Stress Test Results: Banks Need $74.6B

10 banks out of 19 are told to raise capital. Of 10, five are regional banks. So far in after hours trading, it's mostly "buy the rumor and buy the news" event.

Here's the scorecard:

• American Express (AXP): None needed: $25.97 close, $26.70 AH as of 3:04pm PST
• Bank of America (BAC): $33.9 billion: $13.51 close, $14.26 AH
• Bank of New York Mellon (BK): None: $29.51 close, $31 AH
• BB&T (BBT): None: $25.34 close, $26.50 AH
• Capital One Financial (COF): None: $26.45 close, $27.06 AH
• Citigroup (C): $5.5 Billion: $3.81 close, $4.12 AH
• Fifth Third (FITB): $1.1 billion: $5.34 close, $6.40 AH
• GMAC (GJM): $11.5 billion: $12.52 close
• Goldman Sachs (GS): None: $133.73 close, $135.81 AH
• JP Morgan Chase (JPM): None: $35.24 close, $35.62 AH
• Key Corp (KEY): $1.8 billion: $6.78 close, $7.25 AH
• MetLife (MET): None: $31.75 close, $32.50 AH
• Morgan Stanley (MS): $1.8 billion: $27.14 close, $26.90 AH (announced secondary)
• PNC Financial (PNC): $0.6 billion: $44.47 close, $45.55 AH
• Regions Financial (RF): $2.5 billion: $5.23 close, $5.65 AH
• State Street (STT): None: $37.83 close, $41.10 AH
• Sun Trust (STI): $2.2 billion: $18.52 close, $18.25 AH
• US Bancorp (USB): None: $19.56 close, $20.90 AH
• Wells Fargo (WFC): $13.7 billion: $24.76 close, $24.54 (announced secondary)

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Banks to Submit Plans in One Month

Regulators Ask Banks Needing Capital to Submit Plans (Bloomberg)

According to Bloomberg,

"The government will release results of the so-called stress tests Thursday at 5 p.m. Washington time...

"Banks that need to raise capital under the government’s stress tests will have until June 8 to develop a plan and until Nov. 9 to implement it, U.S. bank regulators said today."

One month? We are talking tens of billion dollars for those banks here. One month?

(Now this is starting to sound familiar. Just like Chrysler's Chapter 11 court hearing. Deadline for counter bids for Chrysler's assets by May 20, lead bid by May 26, final hearing by May 30.... )

A hasty move is often a wrong, very wrong move. And what's the need for haste here? Or is the government hoping that by the time November rolles around, 1) People will forget about the so-called stress test and need for so-called capital; or 2) the economy will recover so much that the banks will not need to do anything after all; or both?

And my question from the previous post remains:

What happens if those banks disagree with the results, and refuse to raise capital?

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Bank Stress Test Seen As Political Move

The results of the "stress test" for the nation's 19 financial institutions are due to be disclosed on Thursday, but ever since last Friday "people familiar with the test" and anonymous officials as well as financial analysts have been dribbling the numbers. First, it was only one bank out of 19. Then 2, 4, 14, 10. Warren Buffet has said the test doesn't mean much. The once-Dr. Doom, now calling himself Dr. Realist Roubini has said not to believe it. Every time the name of the bank comes up who needs to raise capital, that bank stock shoots up (e.g. Wells Fargo the other day and today, Bank of America today).

Here's an AP article on the issue, and it raises several valid points:

The stress test is not really to test the health of financial institutions, but it is basically a PR event:

"Regulators and internal auditors routinely use stress tests to manage bank risk. The tests, typically done in private, help guide investments and ensure the banks' stability. Normally, regulators disclose their evaluations and remedies with banks behind closed doors. By contrast, critics say, the Fed's approach seems designed for public consumption."

"One-size-fits-all" approach is not the right one to actually assess the health of the diverse set of financial institutions:

"Providing more information about the health of banks is a worthy goal, said William Seidman, who ran the Federal Deposit Insurance Corp. during the savings-and-loan crisis. But he said the best way to do so would be to tailor the tests to each firm. Among the 19 firms being stress-tested are an insurer, an auto finance giant and banks with diverse business models. [It includes credit card companies, too.]

"Applying the same scenarios to 19 firms makes little sense, Iyer agreed. A"one-size-fits-all approach" doesn't take account of the strengths and weaknesses of each bank's assets.
"I am very skeptical that we will learn much about the true conditions of these banks," he said."

Forcing the banks to boost their capital reserve may not be the answer to the problem:

"Federal Reserve Chairman Ben Bernanke told lawmakers Tuesday that the tests will help banks develop plans to raise their capital buffers if necessary. The extra capital would ensure the banks could keep lending even if the recession worsened.

"Yet there's no guarantee that forcing banks to boost their capital reserves will have the desired result, Seidman said.

"Iyer said he worries the tests have become too tangled in fears of political or economic aftershocks to do much good.

""I'm a little concerned that somewhere in there, we've lost complete sight of the meaning of this exercise," he said."

Here's the list of 19 financial institutions, by the way.

• J.P. Morgan Chase & Co. (JPM)
• Citigroup (C)
• Bank of America Corp. (BAC)
• Wells Fargo & Co. (WFC)
• Goldman Sachs Group (GS)
• Morgan Stanley (MS)
• MetLife (MET)
• PNC Financial Services Group (PNC)
• US Bancorp (USB)
• Bank of NY Mellon Corp. (BK)
• SunTrust Banks Inc. (STI)
• State Street Corp. (STT)
• Capital One Financial Corp. (COF)
• BB&T Corp. (BBT)
• Regions Financial Corp. (RF)
• American Express Co. (AXP)
• Fifth Third Bancorp (FITB)
• Keycorp (KEY)
• GMAC LLC

My BIG question is: What happens if the bank disagrees with the government's findings and refuse to raise capital? Is the government going to take over the recalcitrant bank?

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Wells Fargo Up 20% on News of Capital Need

Go figure. According to various news sources, Wells Fargo has been told by regulators to raise capital after stress test.

Right before the news hit the wire at about 12:30 EST, Wells Fargo (WFC) was trading about $21.40. It immediately dipped, then started ramping up. With 10 minutes left to trade, WFC is currently at $23.63, slightly off the day's high of $23.89.

Other "troubled" banks are flying, too.

• Bank of America (BAC): up 16%
• Citigroup (C): up 7.7%
• Regional Financial (RF): up 22%
• Fifth Third Bankcorp (FITB): up 22%

The number of banks that may be required to increase capital is now supposedly 14, out of 19 tested, as the stress test results continue to dribble out before the "official" announcement on Thursday.

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