TARP Panel: Let's Do Stress Tests Again
Warren, a Harvard University professor, said that the country had "already blown past the worst-case scenario on unemployment."
The stress tests, whose results were made public last month, were designed to gauge how much additional capital a bank would need to weather further deterioration in the economy.
According to the tests, Citigroup, Bank of America and Wells Fargo were among those banks that needed to raise extra cash – nearly $75 billion. Banks submitted plans to the Federal Reserve on how they would raise the capital. If they were unable to secure it from private lenders, the government would step in with additional aid.
The TARP oversight panel's report to lawmakers cites the country's growing unemployment rate as one reason to re-do the tests. The worst-case scenario in the first test accounted for an average annual unemployment rate of 8.9 percent. The country's current monthly jobless rate is 9.4 percent and averaged 8.5 percent for 2008.
Warren also said that the tests used a model that extended only two years, though many commercial mortgages are coming due in 2011, 2012 and 2013.
The panel's final report was delivered to Joint Economic Committee of Congress Tuesday.