They send us a toe ...

... we're supposed to shit ourselves with fear? This is not a stress test. These guys couldn't find reverse on a soviet tank.

Yesterday, as part of the stress test program, I've heard that the Fed issued two highly classified, double top secret documents for examiners and banks titled: "Template for Supervisory Capital Assessment" and "Supervisory Capital Assessment Program, Frequently Asked Questions: Participating Financial Institutions". These guidelines apparently specify how stress tests should be conducted and how to estimate loss rates under both scenarios (baseline and more severe).

What if I told you - not that I would know what is in these documents because my Q and TS clearances have expired - that these document suggests that under the more adverse scenario examiners should use a cumulative loss rate over the next two years below 30% for subprime first lien mortgages? Compare that to the Moody's updated estimate of 28% to 32% for their current baseline case.

Check out the charts in the first link as well. Then hunker down in your bunker and cover yourself in leaves -- it's going to be a long, cold lost decade.