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Reacting to the Stress Tests

Press Release

Date: May 7, 2009
Issues: Unemployed and Low-Income Finance and Banking


Reacting to the Stress Tests

Senator Warner says it appears the long-awaited results of the "stress tests" performed on leading U.S. banks are more positive than many had expected. The tests reportedly have concluded that the nation's 19 largest banks have enough capital in reserve but may need to strengthen their holdings to absorb potential future losses.

Senator Warner was interviewed about the "stress tests" on Bloomberg TV today:

I'm generally more optimistic. I think the range, from the $30+ billion for [Bank of America] to some of the needs of the other numbers - that's doable.

I am anxious to see how much detail we're going to get…. I think the more information, the more transparent, the better.

There are some real questions about the stress test, but I remind the viewers that what these stress tests do is not only look at the worst case in terms of unemployment, but [also] a decline in economic growth, and decline in housing prices. They take a stressed-out situation in all three categories and assume that will hold for two years. Maybe the test can be a little more stringent, but generally speaking, I think they'll give a pretty good snapshot of where these banks are.

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