Indiana Grain Company, LLC

Posted: 04/24/09

By: tomgrisafi

Federal regulators on Friday will privately begin telling the nation's 19 largest financial institutions how well they performed in stress tests to assess their soundness.

Regulators trying to stabilize the financial system also will release the test methodology they used, which could provide clues about which banks may be in trouble (but also could could unwittingly roil the industry.)

The results of the stress tests won't be publicly released until May 4.

The slow-motion rollout is intended to blunt market reaction to the news of which banks are healthy, which ones could fail if the recession worsens and which need more money to survive.

News reports, including a confidential outline of the tests first reported by The Associated Press this week, have led analysts to start handicapping which banks could fail. The speculation will intensify with Friday's release of the test methodology.

"I'm worried about the overreaction, people selling every bank short and pulling out all their deposits and hiding their money in the mattress," said Scott Talbott, a lobbyist with the Financial Services Roundtable, which represents the biggest financial firms.

Regulators are striving to release enough information about the stress tests to inspire confidence. But they don't want to give analysts so much detail that they can run their own tests on the banks before the official release of results.

Source: Associated Press, CNBC

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