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Federal regulators investigating Wall St Journal's 'living wills' story

[WASHINGTON] The Federal Reserve and Federal Deposit Insurance Corporation (FDIC) are investigating how The Wall Street Journal came to report that the two agencies were giving failing grades to some US banks' "living wills" the day before the regulators officially announced their determinations.

A spokesman for the Federal Reserve, Eric Kollig, confirmed on Wednesday the Fed has asked its inspector general, the central bank's internal watchdog, to check how the news outlet was able to report on Tuesday that at least half of the eight biggest US banks, including JP Morgan Chase, would receive "harsh verdicts" on their plans for handling a potential bankruptcy without a federal bailout.

The FDIC's chairman on Tuesday night asked the agency's acting inspector general Fred Gibson to investigate the leak to the Journal of the results of the living wills, spokeswoman Barbara Hagenbaugh said.

On Wednesday, the two regulators said they gave failing grades to the plans of five big banks, including JP Morgan, starting a long regulatory chain that could end with breaking up the banks.

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The Wall Street Journal's story hit Twitter and the outlet's home page hours before the regulators officially posted their determinations early on Wednesday morning and as the markets prepared for banks to release their quarterly earnings.

A representative of The Wall Street Journal was not immediately available to comment on the investigation.

Under the Dodd-Frank Wall Street reform law, banks must submit plans annually showing how they would resolve a bankruptcy without relying on taxpayer money. If the regulators do not find the plans "credible" they can impose higher capital requirements and stricter regulation.



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