U.S. Treasury’s Financial Crisis Warning Bell Didn’t Ring on Repo Crisis of 2019 or 2023 Bank Runs

The Office of Financial Research’s Financial Stress Index, designed to foresee financial crises, has notably failed in its role. It didn’t predict the financial upheaval of the COVID-19 pandemic or the major U.S. bank failures that followed. This raises serious concerns about the reliability of the tools used by federal banking regulators and their grasp of the true state of the financial system. Despite its ineffectiveness, this index continues to be promoted, suggesting a possible disconnect between the perceived and actual financial stability in the U.S.