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Stress Test Preview; Dow Does It Again; U.S. AG Admits Some Banks Are TBTJ

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Receiving Wide Coverage ...

Stress Test Results Are Coming: Today is the day the Federal Reserve tells banks how they fared on their stress tests and whether they'll be able to return more capital to shareholders through dividends or buying back stock. Results won't be made public until March 14, but according to the Journal's Heard on the Street column, "analysts expect healthy capital returns overall." This doesn't mean investors should expect big payouts, as some banks, including Bank of America and Citigroup, which have previously seen return requests denied, and JPMorgan Chase have indicated their requests will be modest. "While chances are good that the 2013 capital-return announcements won't include nasty surprises, they also aren't likely to be game changers," the column concludes. "For that, investors still have to look to prospects for the economy, lending growth and interest rates." Meanwhile, this Dealbook article written by Jesse Eisinger of ProPublica takes issues with the fact that Bank of America is likely to get the Federal Reserve's green light on payouts, since the bank "has been underestimating its legal risks for years." The article cites a lawsuit over an $8.5 billion settlement with investors reached in 2011 concerning Countrywide's bad mortgages as the latest legal risk B of A may be downplaying on its legal reserves accounting books. "In keeping the reserves low, Bank of America has already won," Eisinger writes. "If it turns out that the bank loses its cases and has to pay much more money, it nevertheless has managed to make its books look that much better for years. That surely helped as it has tried to dig itself out of its financial crisis hole."

The Dow Did It Again: "Dow hits another all-time high," Reuters blogger Felix Salmon tweeted, shortly after the Dow Jones Industrial Average closed at 14,296.24, up 42.47 points, or 0.3%, yesterday. "Everything you need to know is in that six-word headline, so really, don't bother clicking." For those interested, here's some big picture coverage links anyway: Washington Post, Reuters, New York Times, Bloomberg

Holder and TBTJ: Attorney General Eric Holder's stunning admission yesterday that some financial institutions are, in fact, "too big to jail" is certainly receiving a fair share of attention. "It's no wonder then that big banks hate the idea of breaking up," Forbes blogger Halah Touryalai wrote, following Holder's statements. "It pays to be big and it also keeps you out of court." New York Magazine's Kevin Roose points out the phrasing at the end of Holder's statements ("And I think that is something that we — you all need to — need to consider") is intended to keep all the blame from being put on the DOJ. Per Roose, "Holder is saying that if Congress wants big banks to be prosecuted when they break the law, it has to pass legislation to make that possible without throwing the financial system into chaos." Meanwhile, this American Banker follow-up from Rob Blackwell and Victoria Finkle outlines how Holder's admission is likely to change the ongoing debate. Financial Times, Washington Post

Wall Street Journal

Bank of America profited from a "well-timed" option bet made on an alcohol-company stock days before the company announced an acquisition. B of A, which was the lead lender on the bet, said it had "no reason to believe there was any sharing of inside information" between investment bankers and traders involved.

This article reviews "Building Home," the biography of Howard Ahmanson Sr., "perhaps the most conspicuous single player in the rise of the savings-and-loan industry." Per the post, "the book provides a compelling account of one era in which the 'managed economy' seemed to work out pretty well for almost everyone."

Financial Times

New proposals issued by the International Accounting Standards Board have done little to quell a regulatory disagreement with the U.S.

New York Times

Apparently Andrew J. Ceresney, leading candidate for a deputy position at the Securities and Exchange Commission, has similar ties to Wall Street firms as Mary Jo White, nominee for SEC chairman.

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(Image: Bloomberg News)

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