Gov't Wants Banks to Keep Stress Test Results in the Vault
Is it a government cover-up? Or is the Obama Administration just trying to avoid any unnecessary market shocks?
The Administration has asked banks currently undergoing "stress test" evaluations to keep the results quiet when they report earnings. The fear is that investors might punish those institutions that don't report positive outcomes.
The order came in a letter to the largest US banks, and is the latest government step to prevent, ironically, good news about banks from dooming other banks with less stellar results to a downward spiral of falling stock prices and financial instability.
Officials quoted say that the administration prefers to announce the results all at once at the end of the month.
The stress tests are designed to determine the banks' health by subjecting their books to a number of negative scenarios, and are supposed to help the government determine which banks are currently healthy, which ones need more bailout, and which ones aren't worth saving.
The tests have been met with some skepticism among industry leaders, with Wells Fargo's CEO calling the process "asinine."
Should the Obama let the banks release the information? Does Wells Fargo's announcement
that it was expecting a record profit - and the resulting jump in bank stock prices
- justify allowing banks to trumpet their good fortunes?