by Pam Martens and Russ Martens, Wall St On Parade:
Yesterday the House Financial Institutions and Monetary Policy Subcommittee held a hearing titled “Stress Testing: What’s Inside the Black Box?” The hearing was convened to examine the manner in which the Federal Reserve conducts its stress tests of the megabanks. The witnesses called to testify included the following: an employee of the Financial Services Forum, a registered lobbyist for banks; an employee of the Bank Policy Institute, a registered lobbyist for banks; Jonathan Gould, a lawyer from Jones Day, whose clients are banks; and one lonely soul, Greg Feldberg, Research Director of the Yale Program on Financial Stability, who was the only credible voice on the witness panel.
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The Chair of this Subcommittee is Andy Barr, a Republican from Kentucky whose largest four campaign donors are the following: employees of the Wall Street private equity firms Apollo Global Management and Blackstone Group; Wall Street-connected venture capital firm and a major political donor, Andreesen Horowitz; employees and the Political Action Committee of JPMorgan Chase, the five-count felony megabank on Wall Street that is leading the charge to gut federal regulatory proposals for higher capital at the high risk megabanks.
Barr began the hearing with an opening statement that closely tracked the arguments that were about to be made by his three witnesses tied to Wall Street banking. Those witnesses proceeded to attack the Fed for the secrecy of its models used to conduct the stress tests and to lobby for putting the models out for public comment. Feldberg, the Yale researcher, said this: “The banks spend a great deal of money trying to reverse engineer the stress tests. And don’t think they do that for any other reason than trying to game the process. They can do a pretty good job of reverse engineering because they already get more information about the stress test models than any other country gives their banks.”
Bolstering Feldberg’s argument, the Fed announced yesterday that all 31 banks it had stress tested had passed the tests.
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