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With $11 billion in reported debt, a black hole in off-balance sheet obligations and $5 billion in cash missing, Parmalat will have to sell either a lot of milk or a lot of assets.
To be effective, however, a stress test must consider market values of assets, off-balance sheet obligations and the need to increase reserves for losses to account for worsening economic conditions.
As Walker told CNBC, "...we have over $50 trillion in off-balance sheet obligations, $37 trillion for Medicare, $9 trillion for Social Security, and those numbers grow faster than inflation and faster than the economy when the economy grows".
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"Certain off-balance-sheet obligations are not included in disclosure.
"We try to reflect these off-balance-sheet obligations in our assessments.
Because they are hidden from view, off-balance-sheet obligations at companies are impossible to assess fully.
The debt rating agencies are concerned about Vivendi's ability to reduce debt and about off-balance-sheet obligations that are structured to rise as Vivendi's share price falls.
Moody's expressed concerns about Vivendi's ability to reduce its debt load and about off-balance-sheet obligations that would go up as the share price goes down.
BUT in today's loosey-goosey world of financial statements, off-balance-sheet obligations include those that keep a company exposed to some liability.
When Russia's inability to pay its debts roiled global markets, the fund, saddled with high-leverage and off-balance-sheet obligations, was near collapse.
These liabilities, delicately described in Farmer Mac's public filings as "long-term standby protection commitments," are off-balance-sheet obligations, and Farmer Mac now has $2.1 billion of them.
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com