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Matt Levine

Goldman Sachs Is Cutting It Close on the Stress Test

Why do Goldman and the Fed get such different estimates for Goldman's stressed capital?

Will Goldman Sachs fail today's stress test? Well, what would that mean? Last week's stress test results measured whether banks were adequately capitalized. At this point, six years into the bull market, it would be a huge embarrassment if any weren't. And in fact they all were. 

This afternoon's results, on the other hand, determine whether banks can return capital to shareholders through new stock buybacks or dividend increases. "Failing" this test means only that you can't return any more capital. "Passing" this test means that you can return the amount of capital that you asked to return. And you had two shots to ask for an amount of capital return: one before you saw last week's results and one after.