“First, regulation by hypothetical is an extension of the risk-management regime, which most scholars believe was either a failure or of limited efficacy. If the risk-management framework failed, as some say, because firms did not consider risks that were severe enough, then hypothetical regulation could provide an antidote by compelling banks to consider more severe scenarios of economic failure. However, if the risk-management regime failed because it was based on a faulty premise—that it is possible to imagine and prepare for every scenario that might affect a firm in the future—then any regulations designed on hypotheticals are of limited use, too. The FRB uses historical modeling in designing its hypotheticals, and therefore these models are inherently unable to account for unprecedented events (or “black swans”), which are often the triggers for financial crises.”