But, especially in the aftermath of events as dramatic as we have seen, this can be a big mistake. All too often in recent months, projections about the economic recovery, about the budget and about the likely evolution of banking loan losses have been provided and received without sufficient acknowledgment of the uncertainty surrounding those forecasts.
Periods of large house price decline were confined to a few idiosyncratic events in a few cities. One could obviously have stressed the mortgages assuming some moderate nationwide house price decline. 7 And indeed a number of the AAA-rated securities would not have maintained their rating under that scenario.