In light of the upcoming release of the Fed’s latest stress-test results, below are the following comments from Mercatus Center scholar Anthony Sanders. Please contact Kate Martin if you’d like to speak to him.
“Like the European bank stress tests, it is doubtful that any of the 19 U.S. banks will fail the Federal Reserve’s stress test. The tests are important because several of the banks want to increase dividends to shareholders, but regulators may me timid about permitting dividend increases for the most vulnerable banks.
“Given the large real estate exposure of Bank of America, Wells Fargo, Regions Bank, BB&T and SunTrust and their relatively small capital levels, they are likely to score the poorest in the stress test. Non-real estate banks like American Express, Bank of New York and State Street will fare the best.
“The Fed’s stress test is meant to alert us to a severe recession-like scenario. This severe recession in the United States, includes a peak unemployment rate of 13 percent, a 50 percent drop in equity prices, and a 21 percent decline in housing prices.”
EXPERT COMMENTARY
Mercatus Center Economist on Stress-Test Results
In light of the upcoming release of the Fed’s latest stress-test results, below are the following comments from Mercatus Center scholar Anthony Sanders. Please contact Kate Martin if you’d like to speak to him.
“Like the European bank stress tests, it is doubtful that any of the 19 U.S. banks will fail the Federal Reserve’s stress test. The tests are important because several of the banks want to increase dividends to shareholders, but regulators may me timid about permitting dividend increases for the most vulnerable banks.
“Given the large real estate exposure of Bank of America, Wells Fargo, Regions Bank, BB&T and SunTrust and their relatively small capital levels, they are likely to score the poorest in the stress test. Non-real estate banks like American Express, Bank of New York and State Street will fare the best.
“The Fed’s stress test is meant to alert us to a severe recession-like scenario. This severe recession in the United States, includes a peak unemployment rate of 13 percent, a 50 percent drop in equity prices, and a 21 percent decline in housing prices.”
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