As if there wasn’t enough evidence of how ridiculous the regulatory environment has gotten, the below WSJ article describes how the Federal Reserve won’t share their formulas for the stress tests. This process is so complicated and there is so much information that it is virtually impossible for any one formula to be right, but not sharing how things are being calculated really creates a lack of confidence in the process. Just as stupid is the fact that if a bank requests too much in dividends or share buybacks, the bank has to completely begin the process again, as opposed to the Federal Reserve just confirming what amount they can return to shareholders. It is this type of uncertainty that stifles lending and economic growth at the worst possible times for our economy and changes must be made.
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