Federal Reserve's nightmare stress test scenario

AP News
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Posted: Mar 13, 2012 6:22 PM
Federal Reserve's nightmare stress test scenario

The Federal Reserve's stress test was designed to make sure banks can withstand an economic collapse worse than what happened in 2008. It imagined a nightmarish economic scenario:

_ Unemployment rate: 13 percent. The rate peaked at 10 percent just after the Great Recession and has fallen to 8.3 percent today.

_ Stock market: Decline of more than 60 percent in stock values over two years. The Standard & Poor's 500 index fell 57 percent from its peak in October 2007 to its Great Recession low in March 2009.

_ Real estate prices: 21 percent decline from today's levels.

_ Economy: 8 percent annual decline in economic output. At the worst point of the Great Recession, during the last three months of 2008, the economy shrank at an annual rate of 8.9 percent.