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Fed to banks: Keep mum on stress test results
CNBC Online ^ | April 11, 2009

Posted on 04/11/2009 3:17:02 PM PDT by pleikumud

Federal regulators have told the largest U.S. banks to keep quiet about their performance on government stress tests. They fear investors could punish companies with nothing to brag about.

In letters to the 19 banks undergoing tests of their financial strength, regulators told the companies not to disclose their performance during upcoming earnings announcements, according to industry and government officials who requested anonymity because they are not authorized to discuss the process.

The order was the latest in a series of government moves designed to keep good news about strong banks from dooming others to a downward spiral of falling share prices and financial weakness. If banks receiving the highest marks trumpet their results, the fear is investors might push down share prices of those companies that make no such announcements.

Government officials want to announce the results all at once, at the end of the month.

The stress tests are a centerpiece of the Obama administration's ongoing effort to stabilize the banking industry. They subject the banks' books to a series of negative scenarios, including double-digit unemployment and further drops in home values.

The test results will help regulators determine which banks are strong enough with current subsidies, which need more money from the government or private investors, and those not worth saving.

The letters follow public statements from bank executives about the tests, including Wells Fargo & Co. Chief Executive Richard Kovacevich's calling the process "asinine." Bank of America Corp. CEO Kenneth Lewis and Citigroup Inc. CEO Vikram Pandit both have alluded to strong performance on separate, internal stress tests in recent memos seeking to build employee confidence.

(Excerpt) Read more at cnbc.com ...


TOPICS: Business/Economy; Front Page News; Government; News/Current Events
KEYWORDS: banks; regulators
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As the Wells Fargo CEO said, this is "asinine". In my view, typical of government bureaucrats wanted to having power and control. Apparently the government is now making it difficult for banks to repay TARP money. The bureaucrats would rather have Control.
1 posted on 04/11/2009 3:17:02 PM PDT by pleikumud
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To: pleikumud

So much for transparency in the financial markets.


2 posted on 04/11/2009 3:19:45 PM PDT by Busywhiskers ("There is a time when panic is the appropriate response." Eugene Kleiner)
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To: pleikumud
Government officials want to announce the results all at once, at the end of the month.

No doubt giving the insiders plenty of "leak time" to position themselves.

With this kind of smoke and mirrors going on, anybody investing in banks now is suicidal. This mess isn't over and now the govt is playing blind man's bluff.

3 posted on 04/11/2009 3:26:36 PM PDT by Oatka ("A society of sheep must in time beget a government of wolves." –Bertrand de Jouvenel)
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To: Oatka

Wasn’t Sorbane Oxley supposed to improve financial reporting a provide more info to investors?


4 posted on 04/11/2009 3:28:09 PM PDT by Oldexpat
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To: pleikumud

I’d love to see a few of the solvent banks have their own “Tea Party” and blow the cover right off of Zero’s aparatchiks.


5 posted on 04/11/2009 3:28:35 PM PDT by facedown (Armed in the Heartland)
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To: pleikumud
Hmmmm, interesting. What do you want to bet the Feds want to keep this quiet so that THEY can effectively blackmail the banks by threatening to release negative results--whether true or false?

If I were the banks, I'd be talking to the press about the results right now whether good or bad.
6 posted on 04/11/2009 3:32:20 PM PDT by Antoninus (Now accepting apologies from repentant Mittens.)
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To: pleikumud
Yeah, I bet 0 doesn't want them bragging about how "healthy" they are...wouldn't want the market to go up.

/s

7 posted on 04/11/2009 3:34:50 PM PDT by demsux
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To: Oatka

I’m not sure you read this:

The letters follow public statements from bank executives about the tests, including Wells Fargo & Co. Chief Executive Richard Kovacevich’s calling the process “asinine.” Bank of America Corp. CEO Kenneth Lewis and Citigroup Inc. CEO Vikram Pandit both have alluded to strong performance on separate, internal stress tests in recent memos...

The banks are doing better. Many want to repay TARP money already. The change in mark-to-market accounting rules helped them a great deal. They have written off so much, they should be able to return to normal operations and show profits. Unless of course Obama’s various tax increases (rescinding Bush’s tax cuts, cap and trade taxes, etc.) further damage the economy.

The mortgage loan meltdown was caused by Congress and HUD under both Clinton and Bush II. They forced Fannie Mae, Freddie Mac, and the banks in general to lower lending standards to increase ownership among lower income groups. Once those standards were lowered, it naturally followed that standards were lowered for all borrowers, leading to zero or very little down payments, interest only, negative amortization, and so on. Hundreds of billions of bad loans were the result. There is plenty of documentation about this.


8 posted on 04/11/2009 3:38:42 PM PDT by pleikumud
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To: Oldexpat
Wasn’t Sorbane Oxley supposed to improve financial reporting a provide more info to investors?

Yes but now since the socialists are in control all rules and laws are to be destroyed in order to impose more socialism.

Expect more lying, cover up, and suppressing of real facts and data to give the impression that economy is much better than what it is in reality. In fact the government is now encouraging companies to cook their books and make it appear that they are making a lot of profits when in reality many are losing money.

All this to provide a fake rally at Wall Street so the media will tell people that Obama socialism is working and the DOW is up because the economy is getting better when in reality the fundamentals of the economy are being destroyed by incredible wasteful spending and socialism. At the same time Obama will be further encouraged to impose the evil and destructive socialism upon our country.

9 posted on 04/11/2009 3:39:03 PM PDT by jveritas (God Bless our brave troops)
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To: pleikumud

Pfffft! Isn’t a publicly owned bank under an obligation to disclose? This is pure barnyard crap.


10 posted on 04/11/2009 3:39:29 PM PDT by pointsal
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To: Busywhiskers

and has the media asked them about their transparency

nah thought not

I loathe the media for lying, for hiding facts and for twisting stories to suit their agenda

If the media had done their job in the first place then we wouldn’t have this bozo clown in the white house right now, we would’;t have had McCain either.

Hunter, tan credo etc would have had the same time as mccain


11 posted on 04/11/2009 3:43:18 PM PDT by manc (Marriage is between a man and a woman no sick queer sham--- end racism end affirmative action)
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To: Oldexpat
SOX was and is an overreaching. I just spoke with an old friend, independent constitutionalists, CPA. IHHO SOX is a nightmare.
12 posted on 04/11/2009 3:47:56 PM PDT by taildragger (Palin / Mulally 2012)
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To: pleikumud
Government officials want to announce the results all at once, at the end of the month.

This smells to high heaven. Next thing you know they will be giving the banks a quota system that they will have to give out a certain amount of loans by the end of the month to uncredit worthy individuals thorough ACORN, mostly in Democratic controlled regions through Democrat own real estate agencies. The Democratic control banks, real estate, and politicians will get rich and the poor uncredit worthy individuals will get back into the rat race thinking the Democrats are for the working class, but all they will end up in life is paying a lot of interest to the Government controlled banks for over priced real estate, while never really earning any equity in Democratic States and cities with no jobs. But that will give them plenty of time to sit in the emergency rooms to hopefully get some one to pay attention to them because they can't get a doctors appointment in reasonable time through their supposely free government health care, which will be nothing more then a big run around for most people who end up on it.

13 posted on 04/11/2009 3:52:22 PM PDT by ReformedBeckite
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To: pleikumud

They don’t own the banks. The banks should tell them to go to hell and release whatever they want to release. He keeps screwing with Wall Street and Banking he may find he is in way too deep. Those are some powerful people. I don’t think he wants them too mad at him. Just some advice for the poser Kenyan in chief.


14 posted on 04/11/2009 4:17:28 PM PDT by mojitojoe ( Idiots elected a Marxist ideologue with narcissistic personality disorder & America is dying.)
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To: pleikumud
I wonder how these coming forecosures will affect the banks?

CA Foreclosures About To Soar…Again

15 posted on 04/11/2009 4:34:48 PM PDT by blam
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To: blam

Shh! Don’t knock the pie out of the sky by pointing out that pesky ‘reality’ stuff.


16 posted on 04/11/2009 4:52:28 PM PDT by perfect_rovian_storm (We are at an awkward stage: too late to fix things from within and too early to shoot the bastards.)
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To: perfect_rovian_storm
Should I Believe in this Stock Market Rally?
17 posted on 04/11/2009 5:49:38 PM PDT by blam
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To: ReformedBeckite

You wrote: “Next thing you know they will be giving the banks a quota system that they will have to give out a certain amount of loans by the end of the month to uncredit worthy individuals ...”

That’s basically what’s already happened. It’s the root cause of the mortgage meltdown. The feds told the banks they had to make high risk loans, lower their lending standards, so that low income & minorities could buy houses. It started with CRA, then expanded under Clinton and Bush. The banks were told: make these loans or we (regulators) won’t approve your applications for new branches in more affluent markets. Freddie and Fannie were told that 50% and more of their financing had to be for low income borrowers. The result, virtually all lenders lowered their standards to remain “competitive” - to get the business at high interest rates, and high risk. Hundreds of $billions were shoveled out the door. This was caused by Congress, HUD, Clinton, and Bush.

As Ronald Reagan said, government is not the solution; government is the problem.


18 posted on 04/11/2009 5:55:04 PM PDT by pleikumud
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To: pleikumud
What you said is all true as I understand it. What I was thinking of though as I was posting was how the Soviet Union factories worked and that is that almost all the factory controlled by the Soviet Union had quotas that they had to produce every month. The joke was during the first two weeks or so you could take off to go fishing and get stuff done around home after that you had to forget it and during the last week everybody worked their ass off to get the quota out. I don't know how true that was but that was how I was told from a Christian business man that went over there to teach business how to run things from a capitalist environment.
19 posted on 04/11/2009 6:29:30 PM PDT by ReformedBeckite
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To: blam

You should start a ping list. You really do dig up some good stuff that even I don’t find on my own and I’m usually in the loop on these things. :)

If you do, please put me on it.


20 posted on 04/11/2009 9:11:40 PM PDT by perfect_rovian_storm (We are at an awkward stage: too late to fix things from within and too early to shoot the bastards.)
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