Fed To Banks: Keep Mum About The Stress Test Results

The Fed met with all of the lucky 19 financial institutions to go over the stress test results. According to the WSJ some meetings were over in 60 minutes or less and others went on for hours.

According to the Journal, several of the banks evidenced a need for more capital but no one yet knows who they are.

The identities of the banks, among the 19 institutions that were subjected to federal “stress tests,” couldn’t be learned. Analysts believe they likely include regional banks with large exposures to commercial real estate in the Midwest and Southeast. Three people familiar with the matter said at least three banks are in this position.

Government officials believe most banks in need can improve their capital footing without taking money from the government bailout fund. This would be done by raising funds from private investors or converting the government’s existing investments in banks into a new type of equity that would better cover banks in case of future losses.

In the latter scenario, the U.S. could end up owning large chunks of banks, raising the specter of something akin to nationalization. Federal officials have said any such move would be temporary. Some banks could end up requiring a cash infusion from the Treasury.

Well good luck to those that “failed.” The odds of attracting private capital are about the same as GM finding someone to bail them out.

Earlier today, I posted the Treasury’s memorandum on the stress tests. I said then I wasn’t going to waste my time reading it, I didn’t and as I suspected someone else in the blogosphere would and would confirm my suspicions. Thanks to Calculated Risk for doing so. As you can see from his post, it contributed nothing.

So back to the title of this post. The word from the Fed at all of their meetings was to zip up about the results of the test. I think the likelihood of that happening is about the same as Ken Lewis keeping his job. Expect to know just about everything by Monday or Tuesday.

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