from Gold Core:
Fed Needs To “Stress Test” Itself As Balance Sheet Balloons To $4.3 Trillion — Yesterday, the Federal Reserve’s stress tests led to jitters in financial markets and in the words of the Financial Times “rattled banks around the world.” Citigroup’s share price was hammered and fell 5.4%
The aftershock of the stress tests was felt beyond U.S. shores for the first time. The U.S. subsidiaries of Royal Bank of Scotland, Santander and HSBC all failed on “qualitative” grounds, which includes failing to project losses rigorously when contemplating a severe recession or market meltdown.
The Fed said that the banks management practices or capital cushions are not robust enough to withstand a severe economic downturn. Not surprisingly, the banks themselves accused the stress tests as being “opaque”.
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