'Stress Test' Potentially Dangerous?

" Mark and now he's saying no to the government's new plan. They gage the banking sector Mike Perry is San Diego trust bank's chairman C yeah and trying to contain Diego California Mike good to see you. Good morning Alexis aria I told -- I want your thoughts on this stress test it's going to be announced this afternoon and you say it's very dangerous tell me why."

" Well I I think it's problematic for a couple of reasons first the wall. You know fear and anxiety has has really gripped the markets especially considering the financials. And I'm not sure how you put together a model. And then apply that to a large complex balance sheet and accurately forecast two years out. What the ongoing viability of that institution is going to be. First of all this is not going to take -- place over one or two days and take weeks is going to take months. Investors. Rightfully so we're gonna be wondering about the health of their particular institution. And then the question becomes what do you do with the test results once you get those back. If you keep those. To yourself. Investors will be left to speculate what they actually had to say. And -- the other problem is what happens. If those results come back and it shows that institution is critically impaired. More than it needs a large capital injection. It's going to be difficult to assess the the private equity markets as something you'll have to go back to you need United States Treasury Department. For a large injection of capital which would then further dilute shareholders and you can imagine what -- what direction might be so. I think there's going to be a lot of uncertainty. Around the stress test. And most companies lately have not been giving guidance for the first government next quarter let alone for the next two years."

" Yeah Agnelli if it's a very valid and sort of disconcerting issue for all of these financial institutions and and many of them. Don't know what the specifics of that stress test are gonna look like. You know the big danger here is the haves and the have -- that the pass fail which Bernanke said yesterday. Would not happen but you're one of those institutions. That when this entire thing started you said no. What you see now."

" Well I think like a lot of community banks across the country. We did not get involved in the residential mortgage market. We didn't have a sub prime us securities on our balance sheet. I quite frankly we've we've managed our business are very disciplined fashion. In after studying all aspects of the program we just infield was in the best interest of our shareholders. To to take taxpayer money and dilute. The the holdings of our loyal supporters."

" You know it's interesting and you guys who put together what you suggest for your own stress tests and back in 2006. He became worried that report called the perfect storm. When will it hit. See you were headed this I guess at the end of the day comes down to Waste Management but does the conversation about nationalization. Does that concern you because. You know it's creating a stigma about the industry."

" Yeah I I I think it is troubling because I'm. There's a there's a few larger institutions I won't name any names they've they've been all of that there's recently. That they are creating a very being held bad black guy if you will. For the rest of the industry there's 8400 somewhat banks throughout the country. So far only about 450 of those have either received or applied for the federal bailout funds so. The vast majority of the banks are finding a way to tell you I take care of business on their own."

" And Michael is asking guests here in California State that's been probably the most hard hit during this recession. When you look ahead now forecasted head for me are we nearing a bottoming housing."

" liked it I liked -- sit here and tell you that it's gonna is gonna turn around not tomorrow I'll Lexus but. This is a big problem. It was a big bubble that person's going to take some time forced to work its way out. There's no piece of legislation I think that's going to resolve it there's no magic formula I think it's just going to take some more time whether that's 23 quarters down the road. It's it's hard to say at this time there's there's a tremendous lack of visibility and that's what's causing the the markets to have so let's extend the time. All right we'll Michael Perry the he had been the chairman and CEO of San Diego trust thank it was great having you on things so much for being here. Thank you let's just out of."