Bank Stress Tests Provide 'Credibility': H. Rodgin Cohen

Europe is going into a "critical phase," H. Rodgin Cohen, senior chairman at the law firm Sullivan & Cromwell, told CNBC today.


If the European banks get credible stress tests and people believe in them, there will be "earning power," Cohen said, adding, "once there is credibility, you can raise capital."

Back in 2009, here in the United States, no program did more to "restore confidence in the banking system" and to raise capital then the stress test, he said.

The U.S. Treasury Department comprehensive stress test , at major financial institutions, "required an assessment of whether major financial institutions have the capital necessary to continue lending and to absorb the potential losses that could result from a more severe decline in the economy than projected."

Cohen thinks the reason for so much confusion over legislation for financial regulation is "much that is good"—a safer, sounder banking system and a better regulatory system—and some things that are not.

On Wednesday the House of Representatives approved an overhaul of financial regulations in a 237 to 192 vote. The Senate is set to vote sometime mid-month. The Senate will vote yes, Cohen concluded.

For more on H. Rodgin Cohen, read David Faber's post:

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