正文
Stress test conditions:
For the unemployment rate, the true worst-case scenario would be the depression-era peak level of 25 percent. But in the bank stress tests, the “worse-case” scenario is 8.9 percent in 2009 and 10.3 percent in 2010.
For GDP, the true worst-case scenario would be the three-year decline of 8.6 percent in 1930, 6.4 percent in 1931, and 13 percent in 1932. But in the bank “stress” tests, the “worse-case” scenario is a decline of 3.3 percent in 2009 and only 0.5 percent in 2010.
Corporate bond default rates are absolutely critical in order to estimate the severity of future default rates on bank loans and derivatives; and Moody’s has recently projected that they will exceed the levels of the Great Depression. However, in its report released Friday on the bank “stress” tests, the Fed makes no mention whatsoever of corporate bond default rates.
For the unemployment rate, the true worst-case scenario would be the depression-era peak level of 25 percent. But in the bank stress tests, the “worse-case” scenario is 8.9 percent in 2009 and 10.3 percent in 2010.
For GDP, the true worst-case scenario would be the three-year decline of 8.6 percent in 1930, 6.4 percent in 1931, and 13 percent in 1932. But in the bank “stress” tests, the “worse-case” scenario is a decline of 3.3 percent in 2009 and only 0.5 percent in 2010.
Corporate bond default rates are absolutely critical in order to estimate the severity of future default rates on bank loans and derivatives; and Moody’s has recently projected that they will exceed the levels of the Great Depression. However, in its report released Friday on the bank “stress” tests, the Fed makes no mention whatsoever of corporate bond default rates.
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