Wednesday, April 8, 2009

Treasury To Delay Stress Test Results Until After Bank Earnings

The U.S. Treasury will postpone the Stress test results until after Q1 bank earnings, according to Reuters, which is citing a source familiar. While the conspiracy theorists among us would not be surprised, this is a strange delay to say the least.
The source, speaking anonymously because the Treasury has not made a final decision on what to disclose, said officials do not want any test results released before the earnings season wraps up for most U.S. banks on April 24.

Bank regulators are at the stage of reconciling their own versions of the results with the banks' internal assessments.

Officials realize it may be hard to keep the results under wraps, and they are looking for ways the banks could disclose some details without unduly disturbing the markets. They are also looking at providing some summary information about how the banks fared.

"There will be definitely be some information that will be provided at the end of it, but exactly what that will be, and when it will be provided, will come forth later," Comptroller of the Currency John Dugan, who supervises some of the nation's largest banks, said last week.

The tests are designed to determine the depth of banks' capital holes if conditions deteriorate further. After the tests are completed, the banks will have six months to either raise private capital to compensate, or accept government funds.

But officials are worried about how the market will react to the stress test results if there is not a clear recovery path for a bank that is deemed to have a large capital need.

While the inverse case can be easily explained, having a bank announce exuberant earnings just to flop a few days later on a stress test failure does not seem like the most prudent approach. And as the Treasury claims, these results will be impossible to be "kept under wraps." Zero Hedge will be happy to chat with people who may have advance knowledge of which banks are deemed as lepers by Tim Geithner's henchmen (if any, of course, seeing how all of a sudden nobody needs any more help).

big hat tip Sean Sphere: Related Content
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Anonymous said...

Got SKF?

Anonymous said...

I would think all the information regarding bank results under the stress test would be considered insider information.

You seem to be soliciting for insider information.

Isn't that a crime?

Anonymous said...

Everyone in the markets thinks the stress test is a joke. I think their "worst case" was GDP stabilizing in the 2nd half and 9% unemployment

Anonymous said...

Actually here are the "Worst case" inputs for the stress test:

2009 GDP -3.3% 2010 0.5.

Unemployment -8.9% on 2009, 10.3 in 2010.

Home Prices (Q4 YoY decline in Case Shiller) 2009 -22% 2010 -7%

Shawn said...

The Treasury action plan is a joke -- "the banks will have six months to either raise private capital to compensate, or accept government funds."

So you have it -- the stress test is to make more capital available to the banks, not to shut down any of the 19 largest banks!!!!!!!!!

Strest test just an excuse to provide capital instead of the typical liquidity.

Anonymous said...

I read somewhere that Shelia is telling people the Stree Test is a joke, PR, nothing more.

Anonymous said...

Would there not be some issues around Reg FD given that they are in possession of material information but are holding it back? Hopefully there will be some nice shareholder lawsuits around this one.

fredw said...

Questions for the Board and Tyler . First , should we interpret this announcement as meaning the results of the stress tests will be : a) not known even by the banks themselves until after earnings season for all "tested " banks has passed ; b) known by some but not all banks when they announce earnings ; 3) not known by any banks until after the embargoed results are released after esarnings season by the Fed / Treasury. Second , how can the banks engae in conference calls discussing their earnings without disclosing the status or results of the stress tests ? Third , by not disclosing the results of the stress tests in detail - once said results are known by the variuos Boards of Dircetors / CEOs , aren't they B.O.Ds and C level personnel witholding material information from shareholders and bondholders ? Fourth , without disclosing the full details / results of their stress tests , how can they sell any type of common / preferred or convertable stock or any form of bonds - wouldn't they have to disclose material info such as the result of their stress test ? Finally , in light of these considerations , why the heck does the Fed / Treasury believe there is a true benefit in being secretive ?

tippy canoe said...

"I would think all the information regarding bank results under the stress test would be considered insider information. "

u mean like that leaked pandit the bandit memo that caused that 'rally' ingnited by that (ssshhh...short squeeze) of C/AIG/Fanfred?

u mean that kind of inside info???

until they wanna play by the same rules, all'sfairinmeat&sexbaby.

i say bring it on TinyTim. let the tylers be the 1st to call your bullshit.

S said...

the only question is who gets sacrificed at the alter to sate the masses. it will NOT be a big bank. it will be a mid sized regional most likley one with no capital markets arm> This will be used as a a false flag to divert attention - like the bonuses. JPM and WFC will coem to market with capital raises as they get the "clean" bill of health; throw in BAC/C

Tyler...thoughts on the swap lines..Alea had post up in comments suggesting perhaps this is banks rolling debt. One cmment suggested citi withdrawls...Thoughts on rational behind the extension of reciprical swap lines?

Alain said...

I understand all the negativity in bank fundamentals, that why I was holding SKF before that short squeeze on Friday. My fault I still hold it, however I wonder about the short term. It seems spincity will prevail on this one, in the short term anyways. I can see SKF diving into the 30-40 in the next month, simply based on the fact that banks need to raise cash, and high share prices are needed for that. Something the players should have no problems making happen for just long enough.

Any though on that, anyone?