Elizabeth Warren Calls for New Bank Stress Tests

I thought the initial Bank Stress Tests run by Treasury Secretary Geithner were largely a sham. I questioned as much in writing last April, “Bank Stress Tests: Major Sham?”:

As with any test, the results are only meaningful if the process and proctor have unquestioned integrity. The proctors for the Bank Stress Test are none other than Treasury Secretary Tim Geithner and Fed chair Ben Bernanke. Why is a testing authority of the magnitude of FDIC, led by Sheila Bair, not more involved in the process? Ms. Bair is the one individual in our country with the greatest level of interaction with and understanding of the student body, that being the banking industry as a whole and individual banks specifically.

What does the FDIC, led by Ms. Bair, have to say about the upcoming Bank Stress Tests? The New York Post provides a CHILLING perspective:

The stress tests the government are about to conduct on some of the nation’s largest banks is being blasted by insiders at Sheila Bair’s Federal Deposit Insurance Corp., who say it’s a pointless exercise that’s more sizzle than steak.The FDIC’s basic beef with the stress test is that it is not a credible way to assess how much additional cash beaten-down banks will need to weather what many Wall Street experts predict will be more losses in the coming months.

The tests are conducted by the Treasury Department and the Federal Reserve on the nation’s 19 biggest banks, including behemoths Citigroup, Bank of America and JPMorgan Chase.It’s a sham,” one source told The Post, describing the test as an “open-book, take-home exam” that doesn’t actually work.

While Geithner, Bernanke, Obama et al have openly declared victory in saving the banking system, there is a very credible voice in Washington calling for a new round of Bank Stress Tests. Who has the gall to make such a demand?

Elizabeth Warren.

Warren stated as much in a Bloomberg interview I watched this morning. She is calling for new tests, not only for the 19 large money center banks but also the regional and community banks, as well. Why is Warren calling for this reexamination? Her primary concern currently centers on the pending and expected losses within the commercial real estate space through 2013.

When asked how her call for new tests has been received by Tim Geithner and team at Treasury, Warren succinctly used the term, “resistance.”

No surprise there . . . but also no transparency there, either.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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