The Federal Reserve wants to make sure Goldman Sachs and JP Morgan don’t bite off more than they can chew.
As part of the central bank’s stress testing program—put in place after the financial crisis hit—the Fed told the two Wall Street behemoths their plans “exhibited weaknesses” that are “significant enough to require immediate attention.”
Both banks passed their stress tests. And the Fed didn’t object outright to their plans to return capital to shareholders to dole out dividends and buy back stock. But they did ask the two banks to refile their plans within a month, which could mean changes to dividend and stock buyback plans.
So far, we can’t be exactly sure of how these firms’ plans will change. In a document released right after the Fed published its results (pdf), JP Morgan said it was “authorized” to buy $6 billion worth of common shares and “intends” to distribute dividends of $0.38 per share. It remains to be seen whether those dividend plans are overzealous. Goldman stayed mum after the Fed had its say.
At any rate, shareholders didn’t like the sound of the whole business. Both JP Morgan and Goldman shares slipped roughly 2% in after hours trading.