Wall Street’s belief that bank stress-testing would be a non-event for the stock market has changed, and investors may not like the results.
The government’s efforts to analyze whether the nation’s 19 largest banks have enough operating capital to avoid federal cash infusions had been receiving scant attention—until serious questions began to arise over whether the process was flawed.
Concerns about transparency and whether the government has set the bar high enough to declare that a bank has adequate operating cash have some worried that a market that is perhaps overbought might suffer once test results trickle out.
“Most investors have basically written off the stress test, but it also has the potential to do damage,” says Quincy Krosby, chief investment strategist at The Hartford. “They have to be very careful. This is going to require a tremendous amount of tact and diplomacy on the part of the administration.”
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