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Pros Say: Banks 'Already Know What They're Doing'

Published: Thursday, 7 May 2009 | 1:34 PM ET

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By: JeeYeon Park
CNBC News Associate

Stocks turned lower on Thursday as bank stocks backed off their early rally. Fed Reserve Chairman Bernanke said increasing the effectiveness of bank supervision is a "top priority" for the Fed. Treasury Secretary Tim Geithner sought to ease fears about the results by saying that none of the banks being tested face the risk of insolvency. Experts weighed in on the stress tests, the economy, and more...

(Note: The stress tests will be made public at 5pm ET this afternoon.)

Stress Test = Confidence Booster?

This whole stress test is an effort to boost confidence, said Robert Shiller, professor at Yale Management’s International Center for Finance. He said the results are aimed more at the general public than the banks themselves. “The banks already know what they are doing.”

Middle Class Will Suffer Most

Former governor of New York Eliot Spitzer criticized the bank stress tests and said the middle class will suffer the most as a result. He said that without any change in bank behaviors, the banking crisis would only continue to persist and grow.

Economic Recovery: ‘V-Shape’ vs. ‘L-Shape’

Simon Johnson, professor at MIT Sloan School of Management, said although he thinks the economy is bottoming out, the main question is if the shape of the recovery is a “V-shape” or an “L-shape.” He said the key determinant would be the financial sector.

Stress Tests ‘Not Stressful Enough’

“It’s good that the regulators are optimistic, but the real stress test is what happens over the next two years,” said Douglas Elliott of the Brookings Institution. He said there are still going to be many components that economists won’t be able to find out from the stress tests. “I’m worried the stress tests weren’t stressful enough,” he said. “We can’t put a lot of reliance on it.”

Swine Flu Vaccine Coming Soon

Novartis [NVS Loading... () ] announced it is evaluating a production of a possible swine flu vaccine. CEO Dr. Daniel Vasella said the earliest material available for clinical trials will be in June and commercial material should be available by September.