Let the guesswork begin

There´s a reason why this week might have seemed even more surreal than usual to people in the financial world. As nervous anticipation of the stress test results gathered force, the whole earth seemed to be turning on a fixed point in time: 5pm on Thursday, May 7, the date the Treasury Department had set for its release of the stress test results. With so much attention focused on that event, it was disorienting to awake each morning to an array of major daily papers casting and recasting it with scoops, almost scoops and not-quite-news. How many banks will fail the test now? How much more capital is needed? Every morning was different and yet the format was the same, like a twisted variation on Groundhog Day.

Looking back, knowing the results, it´s fairly clear that there actually was a core story with linear events and methodical progress around which many of these stories were built. Banks got their stress test results and contested them; apparently Citigroup successfully convinced regulators it needed less capital than they´d originally prescribed. And no one knew how much Bank of America was going to need until almost the last minute.

But digesting each story separately, one day at the time, gave the reader the impression that the papers editors´ memories had shrunk to goldfish-sized capacities, with the same-or even contradictory-information coming out of "people familiar with the matter."

Let´s take a look. On Monday, $10 billion was a magic number. Citigroup needed either at least that sum or upwards of it; and so did Bank of America, according to the Financial Times. Readers got few details on Citi´s arguments with government officials, and there was no inkling that BofA would end up needing multiples of the amount over which Citi was wrangling.

That left plenty of questions for Tuesday´s papers to answer, though they may have raised more than they settled. According to the Wall Street Journal, 10 banks would need more capital, and Wells Fargo might or might not be among them. The number of under-buffered banks had actually fallen, we learned, from an earlier total of 14, though for us readers it had risen from the papers´ consensus a day earlier of four. And from the ever creative FT we were given hope: BofA and Citi might only need $10 billion each.

That brought us only as far as Wednesday, when the New York Times finally spilled the BofA beans, saying the bank would need almost $34 billion. The Journal got the story too, and it turned out to be correct.

Reeling into Thursday, the Journal nailed more numbers, identifying Wells Fargo´s $13 billion need and Morgan Stanley´s shortfall at $1.5 billion. The actual numbers weren´t far off. But the total number of banks had fallen again to seven-another dip in the rollercoaster ride of the week. The FT, meanwhile, shot the moon with Citi, guessing it would need more than $50 billion before, in the same story, concluding it would only need to raise $6 billion. The New York Times used some restraint, listing rather accurately the banks that would need more money and those that wouldn´t, while mostly shirking numbers.

The post-mortem shows an honest effort, if not always a complete one, on the papers´ parts. But it was still confusing. You have to wonder what the regulators thought of all this. It´s hard to imagine many higher ups at Treasury or the Federal Reserve sinking back slowly into an armchair each night this week, tumbler in one hand, papers in the other, thinking "Ah yes. Everything´s going according to plan."