Where else were stress tests used?
Stress tests were used for the Rating Agencies, IndyMac, and AIG. The Rating Agencies’ stress tests gave AAA ratings to toxic waste. Actual losses: more than an order of magnitude greater than those predicted by the stress tests. IndyMac sold over $200 billion of “liar’s loans.” Actual losses: 160 times greater than its tests. AIG (2007): “It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those [CDS] transactions.” AIG (2008): “Using a severe stress test … losses could go as high as $900 million.” Actual losses: 200 times greater. 3. When did Geithner begin to claim that stress tests were the keys to safe operation? As president of the Federal Reserve Bank of New York, in a speech in 2004, he first praised stress tests. He was the principal regulator of many of the largest bank holding companies in the U.S. Every large bank has long used stress tests – and Geithner’s Federal Reserve examine
