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[Aristo]

Fed Said to Order Banks to Stay Mum on ‘Stress Test’ Results



April 10 (Bloomberg) -- 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.
Regulators are using the tests to determine whether the 19
biggest banks have enough capital to cover loan losses during
the next two years if the economy shrinks, unemployment surges
and housing prices keep declining. The tests are a linchpin of
the plan Treasury Secretary Timothy Geithner announced in
February to bolster confidence in the nation’s banks and restore
financial-market stability.
Geithner has likened the stress tests to those used by
doctors to evaluate a patient’s health. They’re designed to mesh
with the administration’s effort to remove distressed mortgage
assets from banks’ balance sheets. The Fed is overseeing the
administration of the tests, people briefed on the matter say.

Progress Report

President Barack Obama is scheduled to get a progress
report on the tests today during a meeting with his economic
team. Geithner will attend, along with Federal Reserve Chairman
Ben S. Bernanke and Sheila Bair, chairman of the Federal Deposit
Insurance Corp.
Goldman Sachs plans to report first-quarter earnings April
14, followed by JPMorgan Chase & Co. on April 16. Citigroup
reports April 17, and Morgan Stanley announces April 21. All
four banks are based in New York.
Spokesman for the banks declined to comment.
“No matter what the result, the stress tests are going to
move markets,” Camden Fine, president of the Independent
Community Bankers of America, said in an interview yesterday.
“That’s the tricky part. If they don’t give out enough
information or the information is presented in the wrong way,
that could cause markets to plunge.”

Silent on ‘Process’

Banks should stay silent because a focus on the tests would
be “a harmful distraction” from earnings, said Scott Talbott,
senior vice president for government affairs at the Financial
Services Roundtable in Washington.
“It is premature for banks to talk about the stress
tests,” Talbott said yesterday. “They aren’t finalized yet and
there is no framework to evaluate the results.”
Wells Fargo & Co. Chief Financial Officer Howard Atkins
declined to discuss the tests yesterday after his bank reported
a record first-quarter profit that beat the most optimistic Wall
Street estimates.
“We haven’t commented on regulatory matters and we won’t
start now,” Atkins said in an interview. “We don’t comment on
the process.”
In a separate interview later, Wells Fargo spokeswoman
Julia Tunis Bernard declined to say whether the bank had been
told by regulators to keep silent. “We don’t comment on our
discussions and conversations with regulators and officials,”
she said.
Under the Treasury’s plan, banks would have six months
after the reviews to raise any new capital they might need. If
the money isn’t obtained from private investors, the government
will provide the funds from the $700 billion bank-rescue plan.
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