Yesterday the New York Times told us that banks are in better shape than "some" think because all 19 of the stress-tested banks would "pass." That's because no bank will be allowed to fail. Today, we learn that the Federal Reserve has ordered the banks not to reveal any results from their stress tests when they talk to investors about their quarterly results.
From Bloomberg (h/t Calculated Risk):
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 ...
The Fed wants to ensure that the report cards don't leak during earnings conference calls scheduled for 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.
I once naively thought bank executives are under a fiduciary obligation to shareholders, creditors and other investors to disclose information material to the financial condition of their banks whenever they make pronouncements of such financial conditions, as in a quarterly earnings statement. In other words, they're not supposed to lie or mislead people. And there's the minor matter of being honest with American taxpayers who are being asked to bail out these same banks for hundreds of billions of dollars.
But apparently our government thinks that the only way for our banking system to hold together is for the executives of the 19 most important banks in the US to mislead everyone. And this is supposed to reassure us? I don't know what to say.
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