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Why Don't We Have DIY Stress Tests?

This is an interesting point: the Congressional Oversight Panel notes that the government didn't release the "baseline scenario" of the stress tests. They only released the "adverse scenario." Releasing both would have demonstrated how sensitive the banks are to changes in the economic environment. It would have essentially allowed outside analysts to construct their own stress tests -- building crude extrapolations that gave a sense of the bank strength in a scenario where, say, unemployment was 10.2 percent and defaults experienced a similar jump.

This is more evidence, I think, for the view that the administration wanted the stress tests to both examine the banks and change perceptions of the banks. And that made it more important that their result was the only result that could be derived from the underlying data.

By Ezra Klein  |  June 10, 2009; 8:02 AM ET
Categories:  Financial Crisis  
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