I can't stress this enough: the idea of publicly releasing big bank stress test results— in any form — is, well... distressing.
We sometimes see the worst of Washington when leaders try to cloak an economic solution in political garb, and that's what's playing out today, with the ironic result of increasing stress in the financial sector and undermining the policy goal.
The political clothing was apparently needed because of congressional spoon-banging over what was being done with original TARP funds. Nevermind that the answer to that question was obvious when the wildfire threatening to burn down our financial system last year was extinguished using only the first have of the $700 billion rescue fund.
The Obama Administration, again demonstrating an unnerving and self-defeating tendency to hop on the latest populist bandwagon, responded with a promise to publicly release the results of stress models applied to the biggest banks receiving TARP funds, and to then make capital infusion decisions based on the results. While the positive headlines must have been satisfying at announcement time, knickers are now being twisted in Washington and Wall Street over whether and how to fulfill the promise.
Let's set aside for now the urgency of the tests themselves. (News Flash: if your stock is trading in single-digits, you probably failed your stress test.) It would be fair to argue that stress tests should have been done years ago. But to argue that there is a need to publicly reveal bank vulnerabilities today is a non-sequitur.