Obama manages expectations in stress tests

WASHINGTON (Reuters) - After a rocky rollout of a bank rescue plan last winter, U.S. President Barack Obama is showing in the release of bank stress test results that his administration learned a valuable lesson.

In this case, he and his team have gone to great lengths to manage expectations in his favor.

His administration got the worst news from the stress tests out a couple of days ago -- that Bank of America would need another $34 billion in capital.

This left him with the best news to announce on Thursday, that the government's test of 19 major banks showed that nearly all appeared to have weathered a winter of economic turmoil.

Treasury Secretary Timothy Geithner, who baffled markets earlier this year with his heavily criticized introduction of a bank rescue plan, used soothing, confidence-building words about the stress tests ahead of the release.

The test results were "reassuring," he told PBS' "The Charlie Rose Show" in a closely watched interview.

"For the system as a whole, I think people can be confident that this system is a stable system, it will be a resilient system, and we'll make sure it is a stable, resilient system," Geithner said.

Federal Reserve Chairman Ben Bernanke, whose tenure will end in January unless he is reappointed by Obama, was singing from the same hymn book.

Publication of test results "will allow, I hope, markets to have greater confidence that they know the condition of the banks and can be reassured that banks will be strong and be able to lend even if the economy is worse than currently expected," Bernanke said on Thursday.

PRESSURE ON JOBS

Obama, reveling in a job approval rating at more than 60 percent, is under pressure to show evidence the economy is improving enough for job creation, since another potentially negative Labor Department job report is due on Friday.

He is juggling many balls in the air, from trying to coax leaders of Afghanistan and Pakistan to go after al Qaeda and the Taliban, to shaving a $17 billion slice from the federal budget to lend the appearance of fiscal responsibility.

Analysts credit Obama for his ability to work on many fronts in trying to turn around the U.S. economy.

Presidential scholar Stephen Hess, a professor at George Washington University, said Obama had demonstrated executive experience of the type he did not possess before entering the White House.

He said it was unclear, however, whether he will be able to pursue both an overhaul of the U.S. healthcare system and an agreement to reduce greenhouse gases blamed for global warming through a "cap and trade" system that Republicans warn would end up as a tax increase.

"It's a very difficult pool table shot," said Hess.

Economist Peter Morici, a professor at the University of Maryland, said the Obama team had clearly shown it could manage a message. "Let's give them credit for running a good PR department," he said.

"They know how to run a campaign, but at the end of the day if they don't get this economy functioning as it should, all the message control in the world won't save them," he said.

There were also concerns about the validity of the tests.

While the test results were positive, Douglas Elliott, a fellow in the Brookings Initiative on Business and Public Policy, said it is too soon to break out the champagne.

"It's definitely good news that the regulators are this optimistic after reviewing each of the 19 banks in some detail. However, the stress test is essentially a prediction about an uncertain future and the regulators could easily be wrong," he said.

(Editing by Eric Beech)