Bank Stress Tests Are No Such Thing

 Posted by on March 29, 2011  Add comments
Mar 292011
 

What’s this about stress tests in the banks?

What stress tests?

Are they going to physically pick up a bank and shake it?  No, they’re not.

Are they going to set fire to it?  No.

Are they going to bash it with a big lump hammer?  They are not.

Will they pile big weights on top of it until it squashes?  Of course they won’t.

So what exactly do they mean by stress test?  Well, as I pointed out before, people in the banking world like to use terms from technology, engineering and science to lend a spurious credibility to what they do, and that’s what has happened with the term stress test.

In the real world, a stress test is something you might do to an aeroplane or a ship or a new engine design.  You run it to its limits to see how it behaves, what parts need to be strengthened and what works well, but before you do that, you run a simulation.  You set up a mathematical model, including as many parameters as you can manage, and you assess as best you can how it might behave before you send a test pilot up in it to risk his life.

That’s what they’re doing with the banks: a simulation.  Not a stress test.

Now, it seems to me that the most important thing they need to get from this process is the truth.  Finally, they need to get honest answers from the bankers instead of the lies they’ve been spinning for the last three years, and that’s where I think a real stress test might be useful.

Everything has its place in this world, including waterboarding.  I see no harm in rounding up the whole lot of them and subjecting them to a series of tortures until they spill the beans.  The Rack, the Iron Maiden, the Boot : all have a distinguished history, and it would be a shame, in my opinion, to let these traditions die out completely.  Bring back the Head Crusher, the Cat’s Paw, the Knee Splitter and of course, most appropriately, the Scavenger’s Daughter.

By Jesus, they won’t be long finding out the real facts about these banks once they start the real stress tests.

 

 

  17 Responses to “Bank Stress Tests Are No Such Thing”

Comments (17)
  1.  

    Regrettably physical torture does not work ,in that the victim will tell or admit to anything the torturer puts to them, a much better way in my humble opinion would be to stop giving these entities our money and allow the whole crappy world of smoke and mirrors to collapse . Drastic and painful I know but what is our future anyway?

  2.  

    Even a simulation would be very useful and informative if you actually simulated a realistic downside case – house prices falling to historical norms against income, in a medium-to-high unemployment scenario, for example. That’s what investors who were short the banks did – it’s not that hard to do.
    If you simulate blue skies and the Easter Bunny, as we did the last time, then it’s not an exercise in identifying weaknesses, it’s a propaganda exercise to stave off a day of reckoning so you can pay out a few more bonuses and hope for a deus ex machina.
    Of course, as a former boss used to say when we were evaluating infrastructure projects – you can start with reasonable assumptions and figure out what the answer is, or you can start with the answer you want and figure out what assumptions you need to justify it. Clearly the “stress tests” have been a case of the latter

  3.  

    skewer one of them, one of the portly management, through the fontanelle, down into the skull. push your narrow stiletto knife right down and out the undeside of the chin. a pickle onion and piece of smelly chedder for decoration. root around for the fontanelle if you can’t locate it, and you may need to use some elbow grease to strike through.

    ask him if he feels stressed.

  4.  

    Bock on the RTE news at one on radio Gavin asked the question Irish Banks how big is their hole and who will fill it? I was inclined to suggest you, but with molten lead rather than Gold.

  5.  

    Once the debt burden passes a certain level, it makes no difference to us how big it gets. We can’t pay it anyway.

    Therefore, it seems to me that a point is reached when the size of the hole becomes an advantage to us, if it scares the European leaders into realising this thing could drag down the entire Eurozone if they don’t do something to help.

  6.  

    Bock of course I agree . However the notion of filling the bankers holes appealed in a flippant sort of way. Ireland can not pay for their idiocy now or ever!

  7.  

    Gary, Ireland are not the IDIOTS here.

  8.  

    Golem the 14th thinks that we, along with Greece and Portugal should default.
    Post from Mr 14th from yesterday.

    http://golemxiv-credo.blogspot.com/2011/03/ireland-greece-and-portugal-should.html

    “Ireland, Greece and Portugal should all default on their debt.
    The problem with saying that is that as soon as you do, a great clucking flock of Chicken Littles come speeding out of their corners, kicking up dust and confusion and drowning out any attempt to discuss the issue beneath a frenzy of shrill cries of “Don’t listen to the madman. If you do the sky will fall on our heads. All the banks will burn down, the ATM’s will all stop working, our houses will be re-possessed, all our pensions – OH WOE! …
    So before they get here I want to say the sky would not fall in. There is, in fact, a history of sovereign default and restructuring of debt and there are recognized and tried methods for doing it. Those countries that have, Mexico, India, Russia, Argentina, Ecuador to name only a few, are still with us, are able to borrow on the bond markets and generally the sky did not fall on their heads nor on ours. ”

    Makes a lot of sense.

  9.  

    I just had a thought. I wonder what our debt would be in Roman numerals? M is the highest digit as far as I know. That’d be a lot of M and Ms.

  10.  

    Islandbank I was referring to the idiocy of the bankers. Although on re-reading I suppose it is possible to take your point.

  11.  

    Gary, you will not find anyone who will disagree about the Bankers.

  12.  

    I am now ascribing the same latitude in my choices and following the example of Banks / Politicians etc, I had a visit yesterday from a person representing ” Officialdom ” and having laid out my choices, He agreed I appeared crazy but sadly for him there was naught he could do to curb my ” crazy choices ” Sorry if this appears vague but i cant elaborate further so as not to incriminate myself !

  13.  

    Don’t mind him Norma. You should have set the dog on him or even better got medieval on his ass with your frying pan. That’d teach him to be messing with a strong independent woman like yourself.

  14.  

    FME. I might fancy it sometimes but the violence rarely works, I’m so sick of worrying about this/that, interest rates, blah blah blah that im intent on channelling my inner crazy.
    Fuck it, life’s for living and i’ll just stay laughing at them, That way they are guaranteed to believe crazy……….I’m on a mission.
    What’s the fucking point in melting my brain with stress tests blah blah when the smell of hyacinths invades my kitchen through an open window…………Simple things, Simple choices.
    My dogs are useless, They only torment me !

  15.  

    I hear ya Norma. Simple pleasures.. You’d only be wasting your time talking to officials from Officialdom. Anyways, no harm in letting people believe you can be a bit of a scary biotch sometimes.
    ” violence rarely works” Ah but the odd time it might. Next time he calls, keep your frying pan in one hand and gently tap your other hand on it and widen the eyes when you’re not liking something you hear. That’ll give him something to talk about.

    Or, wouldn’t you love to do this to all politicians that call round:

  16.  

    I just realised it’s April 1st. Maybe these bank stress tests can be the April’s fools.

    I wonder how Ronan is getting on for Leinster! ha. It’s been a year since that post.
    Jesus, where’s the time going.

  17.  

    In case anyone has not heard about the game of “Endanomics”, I came across this wonderful description recently,

    A banker, a taxpayer and a social welfare recipient sat around a plate of six biscuits. The banker grabbed five biscuits, shoved them in his pocket and said to the taxpayer :
    ‘Keep your eye on that welfare cheat or he’ll steal your biscuit’.

    The direction that Irish society is moving in means that you could probably also start to replace ‘social welfare recipient’ with ‘disability recipient’.

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