Former Senior Bank Regulator Calls Banks Stress Test a ‘Complete Sham’

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!]

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1 Comment on Former Senior Bank Regulator Calls Banks Stress Test a ‘Complete Sham’

  1. It’s maddening to me and is Orwellian.

    Plus what happened to the transparency they promised? Now they’re telling the banks not say anything about the tests.

    I feel like I’m part of a giant shell game where while I’m transfixed some partner is picking my pockets.

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