Government Stress Tests -- FDIC document

Saturday, Apr 25, 2009

For the more adverse scenario, house prices are assumed to be about 10 percent lower at the end of 2010 relative to their level in the baseline scenario.


...the likelihood that the average unemployment rate in 2010 could be at least as high as in the alternative more adverse scenario is roughly 10 percent.

Federal Deposit Insurance Corporation, FAQs – Supervisory Capital Assessment Program, April 25, 2009,

Pretty rosy "worst case" predictions with housing prices falling 10% on average and a 90% chance that unemployment will peak below 11%.

UPDATE: As predicated, the stress tests were useless because the worst case was too optimistic:

The Congressionally-appointed panel overseeing the Troubled Asset Relief Program (TARP) recommends running again the stress tests on US banks, as economic conditions have worsened, its chair, Harvard University professor Elizabeth Warren, told CNBC Tuesday.

"We actually make recommendations to do it all over again right now," Warren told "Squawk Box."

"We've already blown past the worst-case scenario on unemployment," she added.

CNBC, Repeat Bank Stress Tests 'Right Now': TARP Panel Chair, June 9, 2009,