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Regulators need to be stress-tested, too

Gregg Gelzinis emphasizes the need to stress test regulators in order to ensure the stability of the U.S. financial system.

Right before the December holidays, U.S. Treasury Secretary Steven Mnuchin released a statement intended to assure the public that, after speaking with the CEOs of the six largest Wall Street banks, the firms had “ample liquidity available for lending” and that “markets continue to function properly.”

It was bizarre. Telling financial market participants, policymakers and the broader public not to worry about the immediate stability of the financial system — when no one was worried —precipitated the exact opposite outcome. The decision to release such a bold statement, along with some related actions, calls into question Mnuchin’s ability to manage an actual crisis.

The above excerpt was originally published in American Banker. Click here to view the full article.

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Gregg Gelzinis

Associate Director