Big Banks Survive and Cause Trouble

Yahoo! Finance had this posted from the New York Times about the big banks’ reaction to the stress tests. This is an excerpt.

Citigroup, Bank of America and other big banks are disputing so-called stress tests being conducted by federal examiners to determine how these institutions would withstand a deep, prolonged recession. The banks contend they are in better shape than the early findings suggest, although it is likely several will need to raise capital.

Treasury plan to purge banks of their troublesome assets — a seemingly intractable problem — has received a lukewarm response in banking circles. Several big banks have declared they have no intention of participating in the program. Another major effort, one to revive credit for everything from car loans to equipment leases, has also gotten off to a slow start.

Large banks are being put through a battery of tests to see whether they will hold up under pressure in the worst-case economic assumptions over the next two years. Big banks like Citigroup, Bank of America, PNC Financial and Wells Fargo are disputing some of the early findings, which suggest some banks may need to raise capital, according to people briefed on the exams. Because of the protracted negotiations with the banks and regulator infighting over how much information to disclose, officials now plan to announce the results on May 5 or 6, the third time the date has been postponed.

So now they have delayed the date to announce the results of the stress tests. That will keep the banks’ volatility skew up.

“Never mind the price,” James E. Rohr, PNC’s chief, said in a recent interview. “I wouldn’t want to be the first person and be perceived as a weak bank.”

So they won’t participate in the programs because they don’t want to be perceived as weak. Who thinks that they are strong? They aren’t panicked anymore.