Word: bankses
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In good times and bad, bank regulators are supposed to be probing financial firms to see if they hold adequate capital for the loans they make. And the Federal Reserve does publish data about the banks and their capital four times a year. But unless you are a bank examiner...
What was different about the recent stress tests was that unlike the usual bank-by-bank examinations, the stress tests looked at all the banks as a group. By aggregating the data, the Fed presumably could make better estimates of what would be the loan losses at the individual banks...
For now, the Federal Reserve says the stress tests were a one-time thing and it has no plans to do them again. One problem with regularly repeating the tests is that they are expensive and time-consuming. The current one took 150 bank examiners six weeks to complete. Bert...
Still proponents of doing the stress tests say there is an easy way to remedy that problem: do the tests again. As the economy worsens, you could apply more adverse economic conditions to see if the banks hold up. If the economy improves, revised stress tests might also tell you...
"You can't have banks stress-testing all the time, so there is a cost-benefit analysis to be done," says Martin Bailey, who was a chairman of the Council of Economic Advisers under President Clinton and is a senior fellow at the Brookings Institution. "But if you can make...