Banks Bludgeoned Fed Into $50+ Billion Of Stress-Test Concessions

the business insider ^

[FromLori]

Just normal give and take, though. Don't call it lobbying.

One reason the final stress test tab for the banks was lower than expected was that the banks persuaded the Fed to drastically reduce its estimate of capital shortfalls. Bank of America saved $20 billion this way. Citigroup saved $30 billion.

The other reason was that the regulators ended up using "Tier 1" capital as the solvency metric instead of Tangible Common Equity. According to some estimates, this saved the banks $70 billion.

The effectiveness of the outcry from the banks looks bad: Yet another example of wimpy Washington being pushed around by Wall Street. But it's fair. The banks know their books better than the Fed ever will, and every judgment the Fed made in its stress tests--including the economic assumptions--was subjective.

From a PR perspective, the stress tests were handled very well (well done, Tim!), and the fact that several of the banks were able to rush out and raise $10+ billion overnight is encouraging (this would have been impossible three months ago). The main concern about the tests is still that they weren't strong enough and that the U.S. is now officially following the disastrous Japan Solution of zombie banks and denial. Time will tell.

[ovrtaxt]

The banks dictated to the Fed? That doesn’t sound quite right- ‘dictated’ may be a little too strong.

Of course, they’re all part of the same system anyway.

[Vaduz]

Just normal give and take, though. Don’t call it lobbying wink and a nod.