Stress Test Success and Bank Opacity

Donald Morgan

No 20110525, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: In contemplating the recent financial panic, it is easy to get lost in the weeds of repo markets and asset-backed securities and lose sight of the fact that, at the fundamental level, the panic was about inadequate information. Investors were uncertain about what particular assets were worth, and they were uncertain about which banks were exposed to those assets and to what degree. They were also uncertain about how the government would handle undercapitalized banks. It was against this background that the Treasury announced in February 2009 that the nineteen largest U.S. bank holding companies would be subject to an unprecedented stress test to determine if the banks had sufficient capital to survive and maintain lending in the event of a worse-than-expected recession. In this post, I discuss a recent New York Fed staff report that I wrote with Stavros Peristiani and Vanessa Savino that provides evidence that the stress test supplied new information to the market, and thus may have helped quell the panic.

Keywords: bank opacity; even study; stress tests (search for similar items in EconPapers)
JEL-codes: D1 G2 (search for similar items in EconPapers)
Date: 2011-05-25
References: Add references at CitEc
Citations:

Downloads: (external link)
https://libertystreeteconomics.newyorkfed.org/2011 ... nd-bank-opacity.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fednls:86748

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Liberty Street Economics from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().