Tuesday, June 27, 2017

Supervisory Stress Test

The test is conducted by the Federal Reserve. It looks at what would happen to the 34 largest banks should we go into a deep recession. The Fed projects losses of $493 billion. But there is a total  of 5,856 FDIC insured banks. And the federal deposit insurance fund as of March 31, 2017 had on hand only $84.9 billion to bail out all banks that go under. So, who do you think will come to the rescue? You and me!

Note that the projected losses are based on one day's activity (January 3, 2017). Would not the projections be more reliable if they were based on the average for several days?

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