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Bank Stress Tests Delayed   April 7th, 2009
Stress tests delayed until after Q1, does not bode well       

 
QUICK OBSERVATIONS

More observations...
 

News today that the Treasury will not be releasing bank stress tests until after Q1 results would not appear to bode well for what the Treasury plans to report on banks.

The U.S. Treasury Department is planning to delay the release of any completed bank "stress test" results until after the first-quarter earnings season to avoid complicating stock market reaction, a source familiar with Treasury's discussions said Tuesday.


It would seem to me that the only way the "stress tests" could "complicate" stock market reaction is if the government is planning on reporting that some banks must raise capital and/or be forced to accept government money.

I also don't see why the "stock market reaction" is a factor. The market will react how the market reacts, and if there are first quarter earnings reports and news of bank stress tests simultaneously, the market will react and price the companies accordingly.

It seems more likely that what the government really means is that it doesn't want to issue reports that might cause banks to have to adjust their earnings or dividends based on differing expectations caused by news of the results of their stress tests.

Or, perhaps, there are expectations of banks reporting a profit this quarter (since some banks seemed to indicate they were profitable in the first two months), so the administration wants that round of news to give the market confidence... before the administration potentially nukes the confidence with reports of failed stress tests.

In short, I don't see why the government would delay reporting the results of their stress tests if those results were good news. We are left to draw our own conclusions.

Once again the administration seems to fomenting uncertainty... which the market hates.

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