The US should run a second round of bank stress tests if it turns out the government was overly optimistic about the economy in the first round, says a report to be presented to Congress today. The Congressional Oversight Panel, which monitors the bailout, applauded the tests thus far, but noted that they were based on the assumption that this year’s jobless rate wouldn't climb past 8.9%. Unemployment soared to 9.4% last month, the Washington Post reports.
The panel, headed by Harvard Law School prof Elizabeth Warren, said regulators hadn’t been open enough about how the tests were run, making them impossible to replicate to see “how robust they are or to vary the assumptions to see whether different projections might yield very different results.” “Potential risks” could be missed. As long as banks hold toxic assets, they should be subject to more testing, the report said.