The regulator is expected to make those tests more difficult to pass. No changes have officially been proposed but, as the New York Times reports, a senior official says that the Fed is considering different modifications. – Fortune

Dominant Social Theme: The Fed is on the job, always trying to make the banking system better and safer.

Free-Market Analysis: Fortune magazine gives us a heads up on what the Federal Reserve may soon mandate for banks, as can be seen in the excerpt above.

The test is actually fairly simple, though doubtless the details are complex. First the Fed figures out how much money a bank would lose in a volatile market. This number is removed from the bank's capital and if the result brings the total below the minimum requirement, then the bank is not considered to be in compliance.

Now the Fed wants to raise the minimum requirement – that is, the amount of capital a bank has to hold. Supposedly, this would make big banks "more resilient" and less likely to fail.

The trouble with this, of course, is that the bank model is derived from a time when banks held gold and silver as capital. Today, they simply hold electronic digits and those digits can be multiplied at will by the Fed itself.

During the 2008 crisis, the Fed supposedly gave away trillions in short-term loans to ensure that banks didn't "fail." Of course, today, with derivatives markets totaling well over one thousand trillion, any catastrophic failure would require the Fed to print an astronomical amount of money.

Within this context, "stress tests" can be seen more as financial drama than financial reality. Like airport security, the stress tests provide consumers with reassurance but little else.

When one examines the larger operations of the Fed and central banks in general, one comes away convinced that most of what the Fed does is simply for show. The bottom line here is that a small group of people standing in the shadows invented and presumably control the money printing process. They've erected quite a large charade to justify it.

Over at TheStreet.com, we find an unusual article that illustrates this supposition rather well. Entitled "The Federal Reserve's Economic Modeling Is Out of Touch With Reality," the article asks, "How good has the Federal Reserve been at predicting how its policies will affect the behavior of the U.S. economy?" and then answers, "Not that good."

More:

So, what's wrong with the Fed models? John Dizard of the Financial Times has taken on the economic forecasting approach used by the Federal Reserve.

"My problem is not just that the DSGE [dynamic stochastic general equilibrium modeling] group has failed to achieve its publicly stated goals," Dizard said. "It has pursued policies that lead to results that not only defy common sense but result in perverse outcomes."

He rails against the economics profession: "Even within the Profession, the DSGE's obliviousness to the mechanics of financial markets, let alone crises, has been remarked upon.

Does this sound familiar, dear reader? We've written about it plenty of times, explaining that this sort of econometrics is flawed for the simple reason that you can't use backwards-looking statistics to arrive at forward-looking conclusions.

Dizard explains it somewhat differently, writing that the "Dynamic Stochastic General Equilibrium model is the macroeconomic model of the neo-Keynesian school of economics" – but that very few actually understand the model.