Anyone have any good reads explaining this ‘stress test’ Geithner is having all these banks perform? How is a test conducted by the banks themselves going to prove whether or not they are going to survive?
I just did one for my bank. Increased our loss estimate by about 1/3. http://files.ots.treas.gov/482033.pdf
And no it doesn’t prove anything and banks can doctor the numbers a lot. Particularly when portfolios don’t correlate to the macro indicators outlined in the stress test.
We did the stress testing here too. the only thing about stress testing is they’re stressful and not at all very informative. its pretty easy actually, just assume the economy tanks, x amount will default, now what is the result?