Making the Grade?

During what is spring break for many students across the U.S. this week, some corporate students will be wondering what grade they will receive on their recent tests.  Of course, these students are the nation's largest banking institutions and they are sweating the results of the "stress tests" that have been conducted over the past month.  While the Federal Reserve and Chairman Bernanke have been steadfast in their views that the tests are not "pass/fail" by nature, the results could prove to be highly impactful to the institutions.  Here is what the Wall Street Journal reported today.

Top federal bank regulators plan to meet early this week to discuss how to analyze the results of stress tests being conducted on the country's 19 largest banks, people familiar with the matter said. Regulators announced the tests two months ago as part of an effort to determine how much assistance big banks might need to continue lending if the economic downturn worsens. The government is wrestling with how to bolster the lenders without appearing to prop up banks that are beyond repair.  Meanwhile, Treasury Secretary Timothy Geithner said Sunday that the Obama administration would consider removing top management and boards at financial companies if the government were to offer "exceptional" assistance to keep the firms operating.

The next few weeks could be very interesting as the test results shape actions by the regulators.  At the same time, first quarter earnings will be released which could prove to be a "double whammy" for some firms.