Stress tests: The same financial engineering that started the financial mess?
source: http://www.huffingtonpost.com/2009/05/01/stress-tests-are-dangerou_n_195047.html
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Disclosures that at least six of the 19 big banks undergoing stress testing have been ordered to acquire more capital has not assuaged critics who contend that the tests are dangerously mild.
"This stress test is the equivalent of testing the Brooklyn Bridge by running a single heavy truck on it," Nassim Nicholas Taleb, a scholar of risk and chance at Polytechnic Institute of New York University, told the Huffington Post. "Bring engineers for this stress test, not the economists who failed us."
"The fact that six banks failed the stress test is more indicative of the weakness of the banks than the strength of the stress test. Most analysts thought the stress test was pretty wimpy," said Henry Blodget, president of Cherry Hill Research and CEO/Editor in Chief of Silicon Alley Insider. "If a good number of banks hadn't failed, people would have dismissed the stress tests as propaganda. So from the government's perspective, I'd say they were about right (if any more banks had failed under those wimpy assumptions, people might have been terrified.)"
Two of the institutions told by federal regulators to expand capital in order to be able to absorb additional losses are Citigroup Inc. and Bank of America Corp. The other four have not been publicly identified.
The testing was first announced February 10. The departments and agencies involved in the testing include the Treasury, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Reserve Board.
"This stress test is the equivalent of testing the Brooklyn Bridge by running a single heavy truck on it," Nassim Nicholas Taleb, a scholar of risk and chance at Polytechnic Institute of New York University, told the Huffington Post. "Bring engineers for this stress test, not the economists who failed us."
"The fact that six banks failed the stress test is more indicative of the weakness of the banks than the strength of the stress test. Most analysts thought the stress test was pretty wimpy," said Henry Blodget, president of Cherry Hill Research and CEO/Editor in Chief of Silicon Alley Insider. "If a good number of banks hadn't failed, people would have dismissed the stress tests as propaganda. So from the government's perspective, I'd say they were about right (if any more banks had failed under those wimpy assumptions, people might have been terrified.)"
Two of the institutions told by federal regulators to expand capital in order to be able to absorb additional losses are Citigroup Inc. and Bank of America Corp. The other four have not been publicly identified.
The testing was first announced February 10. The departments and agencies involved in the testing include the Treasury, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Reserve Board.
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1percent
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As of today (5/2) 3 more banks have failed this weekend.
All this prior to the release of the Treasuries "stress test".
3 is going to seem like a picnic once the Chinese stop investing in U.S. treasuries.
Prepare for the upcoming Dollar Crisis.
Gold, Silver, and Ammo. The new currencies.
Pareo Nullus
- 3 years ago
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1percent
