The juicy bits from the government's report card on 19 banks.

Those stress tests on the 19 largest U.S. banks had been presaged by strategic leaking that answered a couple of questions: Who'd need the money? Would it mean nationalization? Reading the government's intentions is never easy, but now we've got the tea leaves in the form of a 38-page report on the stress tests' (or Supervisory Capital Assessment Program) results. The Big Money has the juicy bits, and we include a translation to guide the bureaucratic language.

"These examinations were not tests of solvency; we knew already that all these institutions meet regulatory capital standards. ... The results released today should provide considerable comfort to investors and the public".—From Ben Bernanke's statement

Translation: Don't panic. We won't be nationalizing anything. Wells Fargo and Morgan Stanley will issue new common stock to make up your shortfalls—everything will be OK!

"After taking account of losses, revenues and reserve build requirements, in the aggregate, these firms need to add $185 billion to capital buffers to reach the target SCAP capital buffer at the end of 2010 under the more adverse scenario. ... First, the $185 billion accrues to 10 of the 19 firms, meaning 9 of the 19 firms already have capital buffers sufficient to get through the adverse scenario in excess of 6 percent Tier 1 capital and 4 percent Tier 1 Common capital. ... The $185 billion estimated additional capital buffers correspond to the estimate that would have applied at the end of 2008. But a number of these firms have either completed or contracted for asset sales or restructured existing capital instruments since the end of 2008 in ways that increased their Tier 1 Common capital. ... The effects of these transactions and revenues rendered the additional capital needed to establish the SCAP buffer equal to $75 billion."—From Page 3

Translation: Well, maybe you should've worried a while ago. But things are getting better now.

"[T]his exercise counters the risk that uncertainty itself exerts contractionary pressures on the banking system and the economy. In the event the economy weakens more than expected, the firms will have adequate capital."—From Page 3

Translation: Just by doing this test (or reading about it), don't you feel healthier? We do!

"The SCAP (Supervisory Capital Assessment Program) buffer does not represent a new capital standard and is not expected to be maintained on an ongoing basis."—From Page 3

Translation: Treat all numbers we are about to give you with caution! We'll never make banks put this much money aside.

"The results of the SCAP suggest that if the economy were to track the more adverse scenario, losses at the 19 firms during 2009 and 2010 could be $600 billion. The bulk of the estimated losses—approximately $455 billion—come from losses on the BHCs' accrual loan portfolios, particularly from residential mortgages and other consumer-related loans."—From Pages 2 and 3

Translation: On second thought, we could be screwed. $600 billion in losses ... that's more than we've given these banks in TARP money.

"Some firms may choose to apply to the U.S. Treasury for Mandatory Convertible Preferred (MCP) under its Capital Assistance Program (CAP) as a bridge to private capital in the future. MCP can serve as a source of contingent common capital for the firm, convertible into common equity when and if needed to meet supervisory expectations regarding the amount and composition of capital. In addition, the Treasury will consider requests to exchange outstanding preferred shares sold under the Capital Purchase Program (CPP) or Targeted Investment Program (TIP) for new MCP. The 19 firms have U.S. Treasury preferred equity securities of $216 billion."—From Page 4

Translation: You can make some paper adjustments and everything will be OK.

"In total, the estimated loan loss rates under the more adverse scenario are very high by historical standards. The two-year cumulative loss rate on total loans equals 9.1 percent in the more adverse scenario. As shown in Figure 1, this loss rate is higher than two-year loss rates observed for U.S. commercial banks from 1920 to 2007/2008. In addition to the sharpest two-year drop in residential house prices since then, and a projected further steep decline in the what-if adverse scenario, the rise in the unemployment rate in the scenario would be more severe than any U.S. recession since the 1930s."—From Pages 6 and 7

Translation: Don't worry about that adverse scenario. We just made it up to show Dr. Doom, Paul Krugman, and Simon Johnson that we were being "rigorous." But it'll never actually happen. And who really thinks this'll be the worst recession since the 1930s?

"In addition, firms with trading assets of $100 billion or more were asked to estimate potential trading related market and counterparty credit losses under a market stress scenario provided by the supervisors, based on the severe market shocks that occurred in the second half of 2008. The estimated losses from trading-related exposures were substantial, close to $100 billion across the five firms to which it was applied. The primary drivers of potential stress losses were private equity holdings, other credit-sensitive trading positions, and possible losses stemming from counterparty credit exposures to over-the-counter (OTC) derivatives trading counterparties."—From Page 8

Translation: That's almost one in six of the overall potential losses thanks to derivatives and private equity. The vultures and financial alchemists still have us over a barrel.

"Some institutions will be required to take steps to improve the quality and/or the quantity of their capital to give them a larger cushion to support future lending even if the economy performs worse than expected. These institutions have a range of options to raise capital in the private markets, including common equity offerings, asset sales and the conversion of other forms of capital into common equity. If these options are not sufficient, they can request additional capital from the government through Treasury's Capital Assistance Program. Banks must submit a detailed capital plan to supervisors, who will consult with Treasury on the development and evaluation of the plan."—From Timothy Geithner's statement

Translation: We haven't finished mucking around with the banks yet.