Roubini Weighs In on Stress Tests

Eddie Braverman's picture
Eddie Braverman - Certified Professional
Rank: The Pro | banana points 20,996

In case you haven't seen it yet, here is another excellent analysis on the current situation by Nouriel Roubini, particularly as it relates to the stress test results about to be released:
As usual, he provides some scary insight:

The hope was that the stress tests would be the start of a process that would lead to a cleansing of the financial system. But using a market-based scenario in the stress tests would have given worse results than the adverse scenario chosen by the regulators. For example, the first quarter's unemployment rate of 8.1% is higher than the regulators' "worst case" scenario of 7.9% for this same period. At the rate of job losses in the U.S. today, we will surpass a 10.3% unemployment rate this year -- the stress test's worst possible scenario for 2010.

He's usually spot on. What is the overall consensus of the credibility of the stress tests among WSO members?

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Comments (3)

May 5, 2009

I struggle to understand what the government seeks to achieve with them, other than placating John Q Public by pretending they are monitoring the big bad banks.

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May 5, 2009
May 5, 2009

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