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.