Federal Reserve’s “Severely Adverse Scenario” was mild compared to Coronarmageddon

Posted on by conley

The Federal Reserve requires banks to run stress tests that assume certain bad scenarios to make sure the banks can weather a market downturn. Their worst case scenario had GDP falling by 9.9% in Q2 2020 with unemployment jumping to 10% by Q3 2021. Based upon recent estimates from Goldman Sachs, GDP will likely fall over 30% and unemployment could end up at a similar level…within weeks. See page 14 for all of the rosy assumptions that never imagined a pandemic:
https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20200206a1.pdf

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