Richard Bowen

  • Home
  • About
  • Speaking
  • Videos
  • Media/Press
  • Testimonials
  • Blog
  • Contact
  • +1-214-604-5492

December 17, 2015 By Richard Bowen

Bank of America Finally Gets a Clean “Stress” Test — After 3 Attempts!

"Bank of America, Columbia, SC IMG 4799" by Billy Hathorn - Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons
“Bank of America, Columbia, SC IMG 4799” by Billy Hathorn – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons

Bank of America finally won approval from the Fed for its resubmitted stress test, which allows the bank to continue paying their shareholders a 5- cent a share quarterly dividend and to buy back its own stock. If the bank had not passed this resubmitted stress test, the Fed could have forced the bank to stop paying dividends to its shareholders.

Might we be too far off in asking if the Fed is dumbing down its stress tests so that any one (bank), can pass, even though it forces resubmission?

Three times? Really? Since when are we allowed to retake an exam of any kind three times to make sure we can pass?  Wish my professors had been as kind.

In March of this year, the Fed had asked Bank of America to redo certain aspects of its test, which they said had deficiencies in its revenue modeling and internal controls. Incidentally in 2015, Bank of America was the only large bank forced to resubmit.

Bank of America has had deficiencies for quite a while, with more ”snags” in its testing than any other large  bank which made it the only large bank in 2015 that had to resubmit. In fact, this year marked its third stress misstep in the last five years. It seems that Bank of America has been submitting inaccurate numbers since 2009.

Yet, even though Bank of America has passed, the Fed noted it wasn’t fully satisfied with the bank’s resubmission. While the bank did make progress, it “must continue to make steady, demonstrable progress” before next year’s test, the Fed said — perhaps a warning that investors who expect an increase in the bank’s dividend have to take seriously. But wait, weren’t they warned before? Did it make any difference?

The Federal Reserve conducts annual stress tests to assure banks have sufficient capital and can, if need be, survive another financial crisis. Banks that do not get a passing grade are restricted by the Fed from returning capital to shareholders. This Bank of America resubmission points out several issues.

It means that the stress test is a bar the Fed can and may raise even higher each coming year. The Fed has also made it clear that stress tests are going to be more difficult to pass for the largest banks. However the Fed is not yet clear about what it will require in the next round of testing this coming year.

With that said, there are several issues that need to be examined more closely.

Earlier this year, I posted on the stress test discrepancy, “The Federal Reserve Board’s annual stress tests, started in 2009, are complex, time consuming and an exacting process. The goal, to assure banks stay solvent and have a safe ratio of assets to capital.”

Yet, some detractors say the stress tests are a sham. As early as 2009, when the tests were initiated, David Stockman, author of The Great Defamation: the Corruption of Capitalism in America, skewered the tests and wrote, “The key problem with the whole stress test exercise is that it does nothing to improve financial system transparency.” 

Stockman claims the tests are a joke. He cited Bank of America as sailing through the first two testing rounds, yet after Bank of America passed both rounds and they got approval to reward their shareholders for the bank’s good capital management, they notified the Fed that they had miscalculated their capital by a few billion dollars – that’s right,  a few billion!

Let’s also not forget that the banks use the same consultants to guide them through the tests, often using former Fed regulators from the agencies conducting these tests! By the way, I also wonder if there’s any truth to the rumors that bank lobbyists are attempting to put limitations on the stress test in the year end funding bill.

Stockman is convincing in his argument that stress testing is not the answer to the “too big to fail” banks. Breaking them up is his preferred solution, but this scenario with Bank of America is dumbing down the few standards we presently have.

[tweetthis]Bank of America miscalculated their capital by a few BILLION dollars. ~ @RichardMBowen #BofA #tbtf[/tweetthis]

Related Posts

Are the Fed’s Stressed Enough?

The SEC Bites Like a Flea!

Whistle blowing on the rise!

7 Reasons to Be Grateful This Holiday Season
The Goldman Sachs Takeover of the Fed!

Ethics on your mind? Subscribe to my ezine to get my latest article delivered right to your inbox. Click Here to Subscribe

Richard Bowen is widely known as the Citigroup whistleblower. As Business Chief Underwriter for Citigroup during the housing bubble financial crisis meltdown, he repeatedly warned Citi executive management and the board about fraudulent behavior within the organization. The company certified poor mortgages as quality mortgages and sold them to Fannie Mae, Freddie Mac and other investors.

Related Posts

  • Did the Federal Appeals Court Just Open Up the Floodgates to Fraud??Did the Federal Appeals Court Just Open Up the Floodgates to Fraud??
  • Are the Fed’s Stressed Enough?Are the Fed’s Stressed Enough?
  • Really? A Badly Behaved Banker’s List?Really? A Badly Behaved Banker’s List?
  • Ethics: The Road to ProfitsEthics: The Road to Profits

What People Are Saying About Richard M. Bowen

William D. Cohan"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst."

~ William D. Cohan, NY Times Best Selling Author
2017-06-30T10:08:59+00:00
"Richard Bowen is one of my heroes. His is a story of human fortitude at its best and Wall Street at its worst." ~ William D. Cohan, NY Times Best Selling Author
https://www.richardmbowen.com/testimonials/2556/

Eileen McDonnell"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger."

~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
2015-02-13T19:51:19+00:00
"Richard Bowen reinforced my motto that "there is no right way to do a wrong thing.” Long after his presentation, the conversation has continued about personal responsibility and the courage to challenge things that appear to be wrong. We encourage this dialog and rely on it to help make our business stronger." ~ Eileen McDonnell, Chairman, CEO, & President, Penn Mutual
https://www.richardmbowen.com/testimonials/711/

Ben Stein"Richard Bowen, you are a star and a hero."

~ Ben Stein, Economist and Political Commentator
2015-02-13T19:50:26+00:00
"Richard Bowen, you are a star and a hero." ~ Ben Stein, Economist and Political Commentator
https://www.richardmbowen.com/testimonials/712/

Jim Farrell"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership."

~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
2014-12-28T19:48:17+00:00
"Richard's speech at the April Financial Executives International dinner was informative, interesting, riveting, and fast moving.  The feedback from members was overwhelming positive, and Richard received one of the few standing ovations given by our membership." ~ Jim Farrell, Program Chairman, Dallas Chapter, Financial Executives International
https://www.richardmbowen.com/testimonials/532/

Dennis McCuistion"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years."

~ Dennis McCuistion, Host of the McCuistion TV program
2014-12-28T19:48:06+00:00
"Richard Bowen has been there, done that, and has the scars to prove it, and his message of corruption at the highest levels of industry and government needs to be heard. I only wish that more bankers had the courage that Bowen exhibits. He is not only one of the most talented bankers I have ever met, he has more integrity than all the bankers on Wall Street put together. If his former employer had listened to him taxpayers would not have had to bail out Citi for the third time in the last 30 years." ~ Dennis McCuistion, Host of the McCuistion TV program
https://www.richardmbowen.com/testimonials/533/

Betty Garrett"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!"

~ Betty Garrett, Garrett Speakers International
2014-12-28T19:47:50+00:00
"Richard Bowen is a dynamic, entertaining speaker and story-teller - a CPA with a great personality!" ~ Betty Garrett, Garrett Speakers International
https://www.richardmbowen.com/testimonials/531/

fred-timmons"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences."

~ Fred Timmons, Chairman of The Texas Society of CPA's
2014-12-28T19:47:22+00:00
"I believe Richard Bowen is the only keynote speaker to ever receive a standing ovation from the Texas Society of CPA’s at any of its annual conferences." ~ Fred Timmons, Chairman of The Texas Society of CPA's
https://www.richardmbowen.com/testimonials/530/

Presentation Topics

Playing for High Stakes: The Principles and Practice of Ethical Leadership

Dark Citi: The Story of a Whistleblower

Want to Hire Richard?

Watch Richard

See What Clients are Saying

About Richard

Recent Posts

  • Warmest thoughts and best wishes for a wonderful and safe holiday
  • Thanksgiving 2020
  • Pausing For A While
  • The world is in crisis
  • Relationships Count

Categories

  • Business Ethics
  • Congress
  • Corporate Debt
  • Corruption
  • Ethical Leadership
  • Financial Crime
  • Financial Crisis
  • Financial Crisis of 2008
  • Holiday
  • International
  • Mortgage Lending
  • Mortgage Meltdown
  • Relationships
  • Texas Politics
  • The Fed
  • Too Big To Fail
  • Uncategorized
  • Updates
  • Wall Street
  • Whistle Blowers

About Richard

Now an ethical leadership speaker, Richard Bowen was Citigroup's Business Chief Underwriter during the housing bubble.

Read more

Connect with Richard

  Facebook   Twitter   Linked   Google Plus   YouTube

Contact Us

Phone: +1-214-604-5492

Email: Richard@RichardMBowen.com

Contact Richard
Google+

Copyright 2019© 2021 · Richard M. Bowen | ALL RIGHTS RESERVED.

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Cookie settingsACCEPT
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are as essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are as essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.

Necessary Always Enabled

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Non-necessary

Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.

X
Sign up to receive my blog posts via email!
Subscribe >>