Information Flows Up

It's amusing that Nouriel Roubini and Matthew Richardson dismiss the (leaked) forecasts in the stress test as not credible because they're not as dire as forecasts from the IMF and Roubini's RGE Monitor.

Treasury and the Fed had access to more information about banks' balance sheets in conducting the stress tests than the IMF or RGE Monitor could ever dream of. If the stress test estimates that U.S. banks will suffer lower losses on loans and securities than the IMF or RGE Monitor estimates, then it's far more likely that the IMF and RGE Monitor's estimates are too high, seeing as Treasury and the Fed were working with vastly superior information.