Bank bailout secrecy and “Et tu, Barack?”
The U.S. Federal Reserve has told Goldman Sachs Group Inc., Citigroup Inc. and other banks to keep mum on the results of “stress tests” that will gauge their ability to weather the recession, people familiar with the matter said.
The Fed wants to ensure that the report cards don’t leak during earnings conference calls scheduled for this month. Such a scenario might push stock prices lower for banks perceived as weak and interfere with the government’s plan to release the results in an orderly fashion later this month.
“If you allow banks to talk about it, people are just going to assume that the ones that don’t comment about it failed,” said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.
So they set up stressless “stress tests” designed to be so easy that no bank will fail, and yet the results are still so bad that they are going to keep them secret.
In related news, Jonathan Weil at Bloomberg and Henry Blodget at Clusterstock ask why Obama would continue Bush’s policy of bailing out bad bank billionaires at the expense of ordinary Americans. The charitable explanation is that he actually believes that giving unlimited public resources to bad businesses is the best policy. The darker view is that Obama is under the spell of his advisors who are once and future Wall Street fatcats themselves.