Monday, July 6, 2015

Wall St Journal should 'apologize': analyst

The Wall Street Journal misled investors about the Treasury Department's bank stress tests, and should apologize to investors who dumped bank stocks only to watch them rebound when Treasury reported stronger-than-expected numbers, says bank analyst Dick Bove.

Wall St Journal should 'apologize': analyst

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Weeks ago when it was stress-testing troubled banks, "the United States Treasury... started to feed information about the banking stress test to the (Wall Street) Journal which then proceeded to write a series of articles... suggesting serious problems in the banking industry... Thousands of investors were selling these stocks based on (the Journal's) information," writes veteran bank analyst Richard X. Bove, now of Rochdale Securities, Connecticut.

"Then the actual results of the stress test were released (last week) and investors discovered the banking industry was in strong enough condition to withstand a Depression-like hit to their loan portfolios... Bank stocks rallied strongly.

"The fundamental problem may have been that the Journal may have been attempting to sell a point-of-view and not providing balanced reporting. Or, it could just be that the Journal simply does not understand the banking industry...

"The stress test demonstrated that the banks are not insolvent but actually are in position to grow their balance sheets. The Treasury-leaked reporting in the Journal provided no indication of this possible result and, therefore, provided investors with inaccurate signals. Apology required."

Bove concludes that the stress tests, while proving the banks are more or less solvent, will make them want to conserve capital until the economy recovers, instead of lending aggressively to end the recession early, as the government wants them to do.

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PhillyDeals posts drafts, transcripts and updates of Joseph N. DiStefano's columns and stories about Philly-area business, which he's been writing since 1989.

DiStefano studied economics, history and a little engineering at Penn and taught writing at St. Joseph's. He has written thousands of columns and articles for the Inquirer, Bloomberg and other media, wrote the book Comcasted, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com, distefano251@gmail.com, 215.854.5194 or 302.652.2004.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

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