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stress testing zombie banks

March 22, 2014

Washington Post: “Could your bank survive the zombie apocalypse?” by Danielle Douglas

five years after the financial meltdown, there are still some banks that couldn’t really withstand another shock.


Seven institutions, including JPMorgan Chase, Bank of America and Morgan Stanley, had a little above 6 percent common equity in the Fed’s apocalyptic scenario

a low equity ratio doesn’t mean a bank will definitely need a bailout, the underlying fear built into these tests.

Also, the banks examined by the Fed could have a stellar plan to raise more capital to fight off the financial zombie apocalypse.

So now we have some real numbers for what zombie apocalypse looks like:

11.5 percent unemployment, 50 percent drop in stock prices, $366 billion in total losses on loans, 25 percent plummet in home prices

Meanwhile in Europe, “Eurozone told back fund to shut zombie banks” by John O’Donnell about ECB chief Danièle Nouy saying:

“The banks that have to disappear are… the zombie banks,” the ECB watchdog chief told MEPs, referring to banks that are so laden with bad loans they are unable to give fresh credit.
“I hope that action needed will be taken and we will not have any more zombie banks,” said Nouy.

zombie daniele nouy ecb

Meanwhile, one person in jail because of the mortgage crisis, interview in WSJ: “A Prison Life: Ex-Banker Struggles” about Lee Farkas, see also Ocala: “Farkas says he feels like a zombie in prison interview with WSJ“:

Lee Farkas told the Wall Street Journal that he feels like a zombie in federal prison.

“You’re not really alive in here, you’re a zombie — just a body walking around, eating, sleeping and being yelled at,” the paper reported on Wednesday

Farkas continued to maintain his innocence and said he was singled out for punishment during the financial crisis because he lacks political clout in Washington D.C. His appeal is pending.

Should we arrest more of these zombies? Or bail them out?

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From → criminal, economics, money

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