Where are the baseline stress-test results?
Another datapoint for the annals of regulatory opacity: the Congressional Oversight Panel points out in its report on the stress tests that Treasury never released the results of the baseline-scenario test.
Because results are presented on the “more adverse” scenario alone, the ability to extrapolate results from a single set of data is impaired. Even though the “baseline” scenario was likely too optimistic, publishing the results from that scenario would have improved transparency and enabled private analysts, who can play an important role in the way information is used, to present their own predictions and analyses.
If we knew how much difference there was between the baseline test and the more-adverse test, then analysts could at least do a rough-and-ready extrapolation to any forecast they liked. With only the one set of datapoints, however, it becomes impossible to tell how sensitive banks’ solvency is to changes in macroeconomic variables.