"...the new worry is that this latest effort to instill confidence may undermine it instead.When the stress test was first conceived, it was never clear whether the results would be made public. But within days of the government’s announcing the test, lawyers inside the banks started to point out that, ahem, this may be material information, which means by law they have to disclose it to shareholders."
So I guess it is a good thing FERPA does not hold for banks! Which brings us to this piece from CNN:
U.S. tells Citi, Bank of America to boost capital - report - Apr. 28, 2009:
"Government regulators have told Bank of America Corp. and Citigroup Inc. that the banks need to increase their capital reserves based on preliminary 'stress test' results, according to a report published Tuesday.That said there already seem to be some questions and concerns about the test itself.
The capital shortfall at Bank of America could amount to billions of dollars, the Wall Street Journal said, citing people familiar with the situation."
Let's hope they really stress-tested things.
TARP Cop Sees Unstressful Bank Tests - NYTimes.com:
"The adverse scenario used to test the health of the 19 largest U.S. banks is 'disturbingly close' to current economic conditions, sparking a concern that there might need to be a second 'stress test,' a U.S. financial bailout fund watchdog said on Monday.Given that things seem to rebounding the "disturbingly close" is troubling even if based purely on speculations since in the same article,
"Elizabeth Warren, who chairs the Congressional Oversight Panel for the Troubled Asset Relief Program, said the test may in actuality be rigorous, but the government's recent document describing the test's methodology lacked critical details.As a teaching point: when running simulations, scenario analysis, or sensitivity analysis, always be sure to test the limits. Remember, "Bad" is "Bad", not just "not good".