2013 Dodd-Frank stress test: government bond losses assumed temporary and not marked-to-market

Losses on securities held in the available-for-sale (AFS) or held-to-maturity (HTM) portfolios are projected other-than-temporary impairment (OTTI) over the planning horizon.  OTTI projections incorporate other-than-temporary differences between amortized cost and fair market value due to credit impairment, but not differences reflecting changes in liquidity or market conditions. 

Some of the AFS/HTM securities, including U.S. Treasury and U.S. government agency obligations and U.S. government agency mortgage-backed securities (MBS), are assumed not to be at risk for the kind of credit impairment that results in OTTI charges.

~ Dodd-Frank Act Stress Test 2013, p. 43, March 2013

Bethany McLean on bank capital levels

Capital isn’t this pile of money sitting somewhere, it’s an accounting construct.  And if you don’t have the accounting right then the capital is just an illusion anyway so I am a little weary of this notion that has taken hold…that if we have enough capital we’re safe come hell or high-water, I don’t buy it.

~ Bethany McLean, "Bank capital is an illusion: Bethany McLean," Daily Ticker, April 29, 2014

(McLean thinks we’re much better off than we were in 2008 and that though there might be another crisis, it won’t be in the banking sector.)