Neil Barofsky, former special inspector for the U.S. Treasury’s Troubled Asset Relief Program and a Bloomberg Television contributing editor, talks about the results of the Federal Reserve’s bank stress tests. Here is the direct link.
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Stephanie (that nice lady in green) would made a very good Goldman Sachs “muppet.” Would the Fed really create a lenient stress test designed to restore confidence in the banking system? Is she kidding, or was it her turn to ask the “duh” question of that segment?
Of course the stress tests are intended to restore confidence, or they would not be broadcast across the entire MSM/FN spectrum. The Fed must conduct real stress tests behind the scenes, in secret–just like most everything else of consequence that they do.
The Fed works for the banks. Jamie Dimon just reasserted that fact yesterday. Their number one priority is to protect its members/owners. If employment is truly part of the Fed’s mandate, it only matters vis-a-vis how this affects the banks (e.g. high unemployment > high foreclosures > loan losses).
Chris Whalen also questioned the validity of the stress tests, saying that the test assigned an insufficient weight to real estate exposure. Capital rations may one day go the way of reserve requirements—like, to nothing (in reality, if not technically). However, I wonder why the banks would pretend to care about capital ratios anyway. If things go bad, they have a ready source for all the equity they’ll need. It’s called the tax payer.