▶ Amid the chaos in the wake of Silicon Valley Bank’s failure, which sowed panic and threatened a global banking crisis, one fair question was: Weren’t those famous “stress tests” established by the Dodd-Frank Act supposed to prevent this?
Indeed, the Dodd-Frank Wall Street Reform and Consumer Protection Act was designed to envisage all kinds of “severely adverse” scenarios. Some have pointed out that the legislation—sponsored by Sen. Christopher J. Dodd and Rep. Barney Frank in 2010 to prevent a meltdown like that of 2007–08—was significantly weakened by rollbacks during the Trump administration.
That’s true, but it’s also worth noting that the models in the original legislation totally failed to predict the storm that stirred the current crisis: a historic leap in interest rates.
“In the stress tests, the
