Bank Stress Tests: What do They mean?

Bank Stress Tests: What do They mean?

Blog Date: 3/23/12

Blog Author: Joseph Antony, Business Management Major 


The Federal Reserve conducted a stress test to see if major U.S. banks were adequately equipped in terms of capital to deal with a Depression like economic scenario defined as a 21% drop in housing, 50% decline in stocks, and an unemployment rate of 13%. Banks had to have a minimum 5% Tier 1 common capital ratio in order to pass the test. This was the first stress test conducted by the FED since 2009 in the aftermath of the financial crisis. The results came in on Tuesday, and they are looking good. Eighteen of the nineteen banks which were tested were deemed strong enough to not have a need to raise capital, and 15 of the banks passed the 5% minimum capital ratio test. One noteworthy fact though is that of all the major banks, Citi was only able to score a 4.9% capital ratio which prevented them from raising their dividends to shareholders. Citi, the third largest bank in terms of assets, has shown some vulnerability in contrast to the other major banks such as JP Morgan which has passed their stress test in flying colors. The markets have responded well to this announcement, and coupled with a strong consumer retail report, and a strong report from the FED regarding the economy, many of the indexes had reached multi-year highs on Tuesday.

While many would agree this stress test was a good thing to have conducted, one has to question whether this sort of test is actually effective at preventing future financial calamities such as the one we saw in 2008. In other words, how effective is this stress test at judging a bank’s financial health and how effectively can it judge how a bank will perform in times of turmoil? Some analysts and experts agree while this is a noble gesture, it really doesn’t do much to predict future financial crises. In the end perhaps it is better to have the test than to not have the test but overall this test can only go so far in determining how strong banks really are financially speaking to deal with some sort of future economic catastrophe. 

Government Makes a Streaming Dam

Government Makes a Streaming Dam

Blog Date: 2/8/11

Author: Edwin Ayala, Business Management Major

Edited by: Louis Lamonte, Accounting/Management Major

     Just days before Superbowl XLVI, U.S. prosecutors have stated that they have seized 16 illegal streaming websites. These websites have streamed live sports and pay-per-view events over the Internet. The man they have charged owns nine of those websites. According to the government, the 16 websites provided links to give viewers easy access to other sites that hosted pirated telecasts from the National Football League, National Basketball Association, National Hockey League, World Wrestling Entertainment Inc ("WWE") and TNA Impact Wrestling. The latter is also broadcast on Viacom Inc's Spike TV.

     These websites are costing advertisers, leagues and broadcasters millions of dollars a year, and some of this cost is passed on to the fans and subscribers. The websites are firstrow.tv, firstrowsports.com, firstrowsports.net, firstrowsports.tv, hq-streams.tv, robplay.tv, soccertvlive.net, sports95.com, sports95.net, sports95.org, sportswwe.net, sportswwe.tv, sportswwe.com, xonesports.tv, youwwe.com and youwwe.net.

Feel free to post and share your thoughts below

Is GREED good?

"Is GREED good?"The notorious question presented to us by the fictional yet infamous Gordon Gekko. Although we know Gordon Gekko as the villainous, self-indulging narcissist, his theory of “Greed is good” is in fact true, sort of. In arguably Gekko’s most memorable quote he states; “Greed, in all of its forms; greed for life, for money, for love, knowledge, has marked the upward surge of mankind and greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the U.S.A.”

The true essence of this quote, although boisterous and highly controversial, is feasible. Greed when contained and used competently can be a practical commodity. It is greed that fueled the Westward Expansion and the California Gold rush. From the years 1848-1855 300,000 Americans saw ample opportunity to “strike gold” (literally) and upend their lives and move west. If those “forty-niners” didn’t possess greed for gold, the state of California would certainly not be the state it is today. Means of transportation such as steamships and trans-continental railroads expanded and as a result towns literally developed over night. In 1846, San Francisco had a population of 200, by 852 the population inflated to 36,000.

The ideology of Free Market Capitalism is an exemplary illustration of greed being good. We are our own competition, we dictate how far we want to go in life and how much we want to make. (Ideally) Our nation prides itself in our Capitalistic values and the idea that our potential for success is limitless. We are encouraged to start our own businesses, to work hard and make excess amounts of money if we so desire. It is greed that inspires us to work hard and gives us the utmost sense of jubilation when we see 7 digit numbers in our bank accounts. Greed when in it’s pure from is one of the main reasons for not only our personal success but for the success of the United States.

This idea of greed being good is highly controversial, as there are a surfeit amount of examples I can use to show greed’s catastrophic power. However, if greed can be harnessed into its pure form and used proactively, well I can’t help but agree with Mr. Gordon Gekko’s infamous quote “Greed, for lack of a better word, is good.”

Daniel Soares

Wall Street Warriors?!

I'm sure many of you have read and/or heard the news of the portesters who are protesting on Wall Street.  However, why are they protesting? Are they protesting in the proper manner? These are both questions that have not yet been definitively answered.  And I hope to be able to spread some light on the situation.

Recent polls taken in the past few weeks have questioned protesters why they are occupying Wall Street.  Basically, every individual who was polled stated that they are protesting in response to the decreasing economy.  They blame Wall Street for causing the current economic problems as well as the lack of jobs and are protesting in order to demonstrate their frustration.  They also claim that they stand for the people, especially the unanswered voices of the people.  The views of the protesters can be summed up in the words of Judy Lonning, a former school teacher.  She said, "We [being the protestors] are not willing to keep suffering for Wall Street's sins.  People here are waking up and realizing that we can't just go to the ballot box. We're building a movement to make our leaders listen."  Seems harsh right?  She is claiming that Wall Street is responsible for the economic crisis, and that the people have no voice.  Now is that true? are they valid reasons to protest? or are the protestors overreacting?  The answers to these questions are subjective to the indvidual.  So what do you think?  Are they right? Is what they are standing for legitemate?

In regards to the actual protesting itself, a recent poll's results indicated that American view is torn.  Some say that the protesters are protesting in a non violent manner and expressing their rights as any America.  Howver, several others feel that they are acting foolishly, and are tarnishing the name of America (namely New York) through their "obscene" actions.  Again, this is up to the individual.  What do you think?

Regardless of your personal position, the occupation of Wall Street is an important matter that needs to be taken seriously.  It needs to be addressed, but all we can do for now is wait and watch.   

As of last weekend, the Wall Street Journal had a very interesting article concerning the matter.  It discussed how the protesters won a battle when the cleanup of their encampment was cancelled because of "political pressure."  The article explained how the movement is spreading throughout the U.S. in which "tensions between the police and protesters have escalated in several other U.S. cities, including arrests of some two dozen people in Denver."  Now if that doesn't indicate that this is a serious matter, I don't know what does?  Lastly, the article explained why Bloomberg could not step in and force the people to leave the park so it could be cleaned.  It concluded with a quote from one of the protesters, Tucker Mowatt, a 26 year old electrician from Maine.  He said, "Today it's Bloomberg, tomorrow it's the president and Congress and maybe Wall Street.  It's a step in the right direction." 

As mentioned earlier, all one can do is wait it out.  The occupation of Wall Street and other U.S. cities obviously illustrates the growing concern of Americans with the condition of the economy.  How the leaders of the U.S. (and the world) deal with the rather rapidly increasing unrest, and more importantly, how they deal with the worsening economy is what it ultimately comes down to. 

What's next?.................. Who knows?

Eric Haslbauer