, Columnist
The Fed Just Bungled Its Bank Stress Tests
A more thorough reckoning is needed to bolster confidence.
More confidence please.
Photographer: Zach Gibson/BloombergThis article is for subscribers only.
The U.S. Federal Reserve faces the daunting task of maintaining confidence in the banking system during one of the worst economic crises on record. Its latest round of bank stress tests has fallen woefully short. It must do better.
The coronavirus pandemic promises to be a challenge for banks, as people and businesses increasingly fall behind on their obligations. Stress tests are supposed to help in such situations, by showing how bad the losses can get, and by ensuring that banks have enough loss-absorbing capital to avoid distress and keep lending.