Former senior bank regulator and S&L prosecutor William Black says the bank stress tests currently underway are a “complete sham…It’s a Potemkin model. Built to fool people,” Black said in a recent interview with Naked Capitalism.
Mr. Black, currently an Associate Professor of Economics and Law at the University of Missouri – Kansas, believes the “worst case scenario” used in the stress test don’t go far enough.
Black, who was counsel to the Federal Home Loan Bank Board during the S&L Crisis, also says the program’s failings go way beyond…technical issues. “There is no real purpose [of the stress test] other than to fool us. To make us chumps,” Black says. Noting policymakers have long stated the problem is a lack of confidence, Black says Treasury Secretary Tim Geithner is now essentially saying: “’If we lie and they believe us, all will be well.’ It’s Orwellian.”
Black during his interview was also extremely critical of Treasury Secretary Geithner, calling him a “failed regulator.” [via Yahoo!]