The Fed wants the American public to believe in the U.S. banking system so an authentic stress test would just scare everyone away.
Fort Worth, TX (PRWEB) March 21, 2014
The Certified Gold Exchange has issued another Investor Alert, this time in response to a March 19 Bloomberg News article which explained how U.S. banks could be have more severe financial problems than the Federal Reserve will admit. Certified Gold Exchange spokesperson Janet Jones says that while only one bank failed the Fed’s stress tests the reality is that many large, long-standing banks could go out of business over the next couple of years.
“The leverage rate of four percent is too low, and the Fed’s model does not take into account all of the real-world possibilities that could happen in an economic collapse,” said Jones. “An NYU study of the same banks found that J.P. Morgan, Morgan Stanley, Bank of America, Citigroup and Goldman [Sachs] would fail and have a combined shortfall of $300 billion. Only Wells-Fargo survived.”
Jones believes the Fed’s stress test idea was flawed from the start because of misplaced parameters. “Besides the fact that the four percent leverage rate is too easy to achieve the Fed does not take into account the fact that banks’ borrowing costs rise over time."
"They didn’t account for the fact that trouble at one bank can cause panic that spreads problems to other banks. Credit freezes can change everything, and the Fed doesn’t like to talk about that,” Jones said. “Additionally, the Fed wants the American public to believe in the U.S. banking system so an authentic stress test would just scare everyone away,” she added.
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