Guarantees and Capital Infusions in Response to Financial Crises C: U.S. 2009 Stress Tests
Yale Program on Financial Stability Case Study 2015-3C-V1
10 Pages Posted: 26 Jan 2016
Date Written: July 15, 2015
When President Obama took office in 2009, the Treasury focused on restarting bank lending and repairing the ability of the banking system as a whole to perform the role of credit intermediation. In order to do so, the Treasury needed to raise public confidence that banks had sufficient buffers to withstand even a very adverse economic scenario, especially given heightened uncertainty surrounding the outlook of the U.S. economy and potential losses in the banking system. The Supervisory Capital Assessment Program (SCAP) — the so-called "stress tests" — sought to rigorously measure the resilience of the largest bank holding companies. Those found to have insufficient buffers were able to raise funds from the private sector, and if unable to do so, the Capital Assistance Program (CAP) would capitalize the firm with public capital.
Keywords: Systemic Risk, Financial Crises, Financial Regulation, Stress Test, Crisis Intervention, Tier 1 Capital
JEL Classification: G01, G28
Suggested Citation: Suggested Citation