Fed Reportedly Tells Banks to Keep Quiet on Stress Tests

So much for that transparency and openness when it comes to the Obama administration’s financial rescue efforts: The Federal Reserve has reportedly told banks to keep quiet when it comes to the results of stress tests done to find out more about their bottom lines, Bloomberg reports.

The story cites “people familiar with the matter” who say the Fed asked the banks to keep mum.

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.

The stress tests are being used to determine how well banks will be able to weather the recession. Some of the analysts interviewed by Bloomberg agreed with the Fed’s approach, saying the stress tests could distract from earnings results, and have the potential to overly influence the stock market.

That may well be true. But the lack of transparency surrounding the government’s rescue efforts already has created a suspicion and mistrust, and concern that things are really much worse than what’s being reported. Banks being ordered to stay quiet on stress tests will only add to this.

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