Tags: siegel | stress | test

Siegel: Stress Tests Crucial to Restore Trust

By    |   Wednesday, 01 Apr 2009 10:26 AM

The proposed bank stress test should show which banks are stable and help restore investor confidence, says Wharton School finance professor Jeremy Siegel.

The test, which is being administered to 19 of the largest U.S. banks to determine how they would perform under more adverse economic conditions, is intended to determine the amount of capital banks might need if economic conditions worsen.

"We can't believe the CEOs" when they say their companies are strong, Siegel told CNBC.

"Last year, Bear Stearns and Lehman said, 'our books are fine, we're liquid, we're solvent' — and they weren't, which is why I view this stress test as very important."

Numbers that can be trusted are a vital building block for market stability, Siegel points out. And though the tests are not pass/fail, they should provide more information about banks’ stability than has been available in the past.

However, Siegel worries that the test calls for bank regulators and bank management to determine the bank asset prices.

“Bank regulators and management cozy up to each other,” he notes. “I'd love to see independent evaluators take part."

JP Morgan CEO Jamie Dimon is "thinking about what we want to do" about releasing the results of a government stress test on the company, Reuters reports.

Dimon said the company already conducts stress tests on its performance and makes regular disclosures, but would not say whether or not his company will make public the results of the regulators' test.

© 2017 Newsmax. All rights reserved.

   
1Like our page
2Share
StreetTalk
The proposed bank stress test should show which banks are stable and help restore investor confidence, says Wharton School finance professor Jeremy Siegel.The test, which is being administered to 19 of the largest U.S. banks to determine how they would perform under more...
siegel,stress,test
242
2009-26-01
Wednesday, 01 Apr 2009 10:26 AM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved