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The bank regulators require larger banking organizations to prepare and file financial projections assuming various adverse scenarios under a program called "stress testing." The Federal Reserve Board staff studies these projected financial results and approve them for some banks and reject them for other banks. If your results are rejected, you may not be allowed to pay dividends to shareholders, and you may be required to raise additional capital. Bankers have been complaining that the basis for rejection is never explained by the Fed, and the Fed has repeatedly declined to make available to the affected banks what standards it is using to approve or reject stress test results. Does this raise an issue as to whether banks are being provided due process rights in how they are regulated? Does it raise questions as to whether bank regulation is governed by the rule of law or something else? Does the Fed have a secret capital regulation that it has adopted without following the Administrative Procedures Act?
- Mr. Walter J. Mix III, Director, Berkeley Research Group
- Ms. Hester Peirce, Senior Research Fellow, Mercatus Center, George Mason University
- Moderator: Mr. Dean Reuter, Vice President and Practice Groups Director, The Federalist Society