Fed’s Stress Tests Won’t Fix a Flawed Financial System: View

Regulators are making a valiant effort to ensure that big U.S. banks can survive the kind of shock the deepening European sovereign-debt crisis could deliver. If only the same were true for the broader U.S. financial system.

In a bid to restore crumbling confidence in the banking sector, and in compliance with the new Dodd-Frank financial legislation, the Federal Reserve is building an improved version of one of its most effective tools: stress tests designed to assess banks’ ability to withstand a market rout and a punishing recession.