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Eurozone Stress Tests
Posted by WARREN MOSLER on May 12th, 2009
The eurozone has decided to keep its banks running via government insured liabilities without regard to capital levels. The new ‘tests’ are most likely for show only.
All governments with non convertible currency and floating FX policy have this option, which allows banks to continue indefinitely with or without capital, however defined.
The only reason to shut a bank down due to capital concerns is to protect ‘taxpayer money.’
Moral hazard is less of an issue as all bank assets are regulated and supervised in any case.
Japan’s recovery was not dampened by its banking system which was there to make loans and service deposits with our without bank capital.
It was dampened by a lack of aggregate demand due to insufficient deficit spending- taxes too high or spending too low.
Every time the economy started recovering they slapped on a consumption tax, in the name of fiscal responsibility.
Taken at its word, the Obama administration seems intent on doing much the same.
EU To stress test banking system
by Jan Strupczewski
May 12 (Reuters) — The European Union will stress test its banking system to determine its resilience to the economic downturn and find out if it is adequately capitalised by September, EU sources said on Tuesday.
The stress tests will be conducted by national supervisors according to common guidelines and methodology issued by the Committee of European Banking Supervisors (CEBS), the sources
said.
“The decision was taken by the EU finance ministers. They decided to ask the Committee of European Banking Supervisors to organise a stress test,” one source familiar with the ministers’ deliberations said.
“But it is not a stress test of individual institutions like the Americans are doing. It is more a highly aggregated stress test, which should show the degree of resilience of the overall EU banking sector,” the source said.
“It would show if there are additional capital requirements or if banks are adequately capitalised for the present situation,” the source said.
A second source close to the EU finance ministers’ deliberations confirmed the stress test of the EU banking system was to be ready by September.
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May 12th, 2009 at 8:08 pm
“Moral hazard is less of an issue as all bank assets are regulated and supervised in any case.”
I need you to explain things to me, because I am very confused. I worked very hard buying a house in palm beach, spend a lot of time and wealth maintaining my home. 2 years ago an ms-18 gang drug dealing illegal alien got a loan from his latino cousin loan officer at the bank to buy a house next to mine. He partied every night, sold drugs, shot his girlfriend, then burned the house down one night, the embers burned down my palm trees. The loan officer didn’t care, he made his bucks and sent the loan securitized do some dumb suckers in china.
So this regulation and supervision you talk about has many leaks all over from what I see.
I can’t wait to go to california and get a loan to start a marijuana farm so I can sell dope to Sada and she can get high while China sends rocketships to the moon – good lord what a 180 america and china have done compared to 100 years ago when 80% of thier country was all opium addicts.
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