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Get Ready For the Biggest Stress-Test of Them All

Matt Kelly | June 29, 2015

For several weeks now, my e-mail box has been peppered with messages from banks disclosing how they fared on this year’s Dodd-Frank stress tests. Almost all announce that their balance sheets would survive even the “severely adverse scenario” that the Federal Reserve proposed this year.

That severely adverse scenario was indeed pretty scary: oil back to $110 per barrel; unemployment soaring back to 10 percent and staying there well into 2016; a 4.5 percent contraction in GDP growth; home prices down 25 percent, equity market down 60 percent; sharp recessions in the United Kingdom and Japan; sluggish growth elsewhere in the world.

So it’s good news to hear that even under those circumstances, most banks have modeled their risks that they can emerge battered, yes, but unbailed out....

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