Recovery is just around the corner. Or something like that. When you look at the foreclosure rates plus the rising unemployment which will only feed the foreclosure rates, it's difficult to see a strong near term for many smaller banks. There's little left to hand out to the small banks because Wall Street already grabbed what was there.
The Wall Street Journal has run its own version of the the Fed's stress test on 900 small and midsize institutions, and it claims they'll see losses of about $200 billion by the end of next year.
In such a scenario, at least 600 of the banks would see their capital levels shrink to a level that would be deemed unsafe by regulators.
The biggest culprate? You guessed it, commercial real estate, which could contribute about $100 billion in losses. Continued home loan losses is next, at about $49 billion.
