Did Fed Plan to Release Stress Tests Early Anyway?

Traders work in the ten-year U.S. Treasury Note options pit at the Chicago Board of Trade in Chicago, Illinois, U.S.
Daniel Acker | Bloomberg | Getty Images
Traders work in the ten-year U.S. Treasury Note options pit at the Chicago Board of Trade in Chicago, Illinois, U.S.

The early announcement of the results of the Federal Reserve’s bank stress tests might not have been caused by the announcement by JPMorgan that it had passed its own test, according to two people familiar with the matter.

The Federal Reserve released the results of the stress tests to the banks earlier today. A person at one Wall Street firm that passed the tests said that the Fed indicated that it planned to announce the results on Thursday—but did not give instructions on what the banks could do with the information.

A person at another firm said that he believed that the Fed was going to announce the results early because some banks seemed to be leaking information to the press.

"The Fed was going crazy reading rumors about the results," this person said.

“It wasn’t Jamie Dimon being some superhero,” said this person (who works for a rival of JPMorgan). “We were moving to release our results today also.”

There was concern at a number of firms that keeping the information confidential could be unfair to shareholders.

Basically, the thought was that the information was material to shareholders and should be announced immediately.

There was also fear that the existence of this information could provide an opportunity for insider trading.

“When you have this kind of important, market-moving information, you simply cannot keep it under wraps for days. Thousands of people at 19 banks know these results. There’s no way you can count on none of that information getting out,” said a lawyer who works for a top Wall Street firm.

Some on Wall Street think the Fed acted irresponsibly by releasing the information to the banks days ahead of the official announcement.

"What was the point of that? Do these guys not understand how this game is played? When important information comes out, it comes out. You don't get to keep it under wraps like you are dropping the next single from Lady Gaga," said a top Wall Street executive who was reached right after the Fed released its official results.

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