STESS TESTING!!!
You were looking for something else to worry about, weren't you?
Well, maybe we're just over-reacting, being a bit too paranoid. NCUA could be very open and welcoming with these new tests...
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| Welcome to Stress Testing !! We Tough Love YOU! |
But then again...
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| Welcome Credit Unions !!! Please wipe your knees! |
... yep, then again.
6 comments:
Stress testing gives you interesting but seldom relevant information. NCUA is obsessing about a movement upward in interest rates. Guess they figure that the only way is up? Bet they will be surprised when they find that the Fed has screwed up and all the money printing will actually cause an an ultimate collapse. NCUA's Crayola Economist should consider interest structure of Japan of the last two decades.
Stress testing looks at more than just a change in interest rates. Under a severe scenario, a stress test assumes a sharp increase in the unemployment rate by 3 to 5 percent; a drop in housing prices comparable to what we saw in the collapse in the housing bubble; a decline in equity prices by 50 percent; and a sharp drop in real GDP. It is also assumes the scenario last longer than a typical recession.
It also causes Chicken Little syndrome!
It forces unnecessary discussions with people that have no understanding of probability of the worried about event ever realistically happening!
Got to go: "THE SKY IS FALLING!"
Dr. Leggett's outline of the Fed sress tests is insightful.
As credit unions, we're pretty certain that our record for safe, sound operations is very solid, even in the most recent period of economic calamity. We are also well prepared for the future.
Most of us would like that solid record to be better known by the public, so that we may draw yet another stark distinction between banks and credit unions.
TBTF banks are still a major Congressional and public concern. Credit unions offer the consumer and the Congress an excellent alternative.
Let's all put up or shut up!
Dr. Leggett's outline of the Fed Stress Tests might be insightful if you believe stress testing can fix stupid!
Fed endorsed long term fixed mortgages supported by short term deposits has been the bane of financial institutions and caused considerable wealth destruction.
I can not wait to see people pay their 30 year mortgages of early when interest rates eventually go back up! Stupid products give stupid results. Hey? Why worry? I have an ALM model!!
"Fixing Stupid" sounds like a fantastic future blog topic....
Might be too big an issue though...
"TBTF" - Too Big To "Fix"?
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