Faulty Bank Stress Tests

Here are examples of how foolish the periodic use of so-called Stress Tests are for evaluation of banks’ strength:

First, publicizing the results as in the past is dangerous to the economy. The term itself is poor because of its psychological implications with regard to the economy and the stock market.

Secondly, little of the public, and only a few in the financial community, fully know what each test is supposed to reflect.

Furthermore, in an emergency, the amount of capital a bank has can be wiped out because of mark-to-market accounting principles that may be applied.

In the past. these actions caused the very financial emergencies they supposedly were meant to avoid.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)