WASHINGTON — Big banks' flirtation with the idea of suing the Federal Reserve Board over its stress testing regime carries significant political risk and even if successful could yield at best a pyrrhic victory over the megabanks' primary regulator.

An academic white paper written by Harvard law professor Hal Scott and backed by a coalition of big banks and industry groups lays the legal groundwork for a lawsuit, arguing the stress tests violate the Administrative Procedure Act by not providing a public notice-and-comment period. It also contends that the Fed's internal Comprehensive Capital Analysis and Review models used in the test are opaque and not well understood by the institutions being tested.

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