Fed "Fails" Stress Test, Releases Revised Results
First the Fed screws up the "dots" - on one hand telling HFT algos not to worry about rate hikes, on the other saying the FF rate in 2016 will be a scroching 2.25%, then Yellen flubs the "6 month" statement sending stock into a tailspin and Hilsenrath and Liesman explaining in overdrive that she didn't mean what she said, and now, we learn with the traditional Friday afternoon "shove under the carpet" bomb, that the Fed also flubbed its stress test results. Sounds about par for the world's most powerful, and clueless, monetary institution.
The Federal Reserve on Friday issued corrected results for the 2014 Dodd-Frank Act stress test. For 26 of the 30 firms, the correction led to either no change or at most a 0.1 percentage point change in the firms' minimum, post-stress tier 1 common capital ratios in the severely adverse scenario. The change led to a 0.3 percentage point increase at two firms, a 0.2 percentage point decrease at one firm, and a 0.5 percentage point decline at another.
The capital ratios were adjusted to address inconsistencies in the treatment of the fourth quarter 2013 actual capital actions and assumptions about preferred and employee compensation-related issuance over the course of the planning horizon.
The attachment reflects the updated minimum tier 1 common capital ratios and the changes from the prior release. The Federal Reserve will reissue a full result paper on Monday with corrections as they affect all capital ratios.
This is almost as sad, if entertaining, as the Treasury releasing a complete set of TIC data, then hours later admitting it had the goalseek formula set incorrectly, and revising the entire thing.
For those who still care about anything the megalomaniacal, if somewhat confused, central planners at Marriner Eccles have to say, here are the revised results.
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