The familiar fingerprints on the Fed’s stress test changes
By John Heltman
While the winds may be changing at most banking agencies since President Trump’s election, the Federal Reserve Board’s plans to update and revise its stress testing program is one area where there is a lot of continuity between the prior administration and the current one. But in contrast to other initiatives at other agencies, where Trump appointees are poised to go in a significantly different direction than their Obama-appointed predecessors, the Fed’s stress test work appears aligned with the vision set out by previous leadership. … Karen Shaw Petrou, managing partner at Federal Financial Analytics, said that the focus on transparency is in large part a political choice, or at least one informed by political pressures. She said these changes are meant to give the agency more breathing room to make whatever future changes it sees as appropriate without unwanted Congressional mandates. “The big push is clearly on the transparency issue, it’s part of the reason of the political fire,“ Petrou said. “The Fed is in defense mode to try to prevent the Hill from changing the stress test in ways they don’t want.”