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Wall Street Preps to Flex its Muscle for the Fed

By David Hanson – Mar 20, 2014 at 2:35PM

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The biggest stories from Thursday’s world of finance.

Could the stress tests break the big banks, and why are insiders at Zillow selling? On today's Where the Money Is, Motley Fool banking analyst David Hanson unpacks the stress test process for investors, and digs into why Zillow's CEO is selling off shares.

The results of the Fed's stress test are due to be announced today at 4, when investors will get to see just how prepared the big banks are in case of another major economic downturn. David discusses how the stress tests work and the three scenarios that the banks will be tested on, and he also shines some light on the biggest risk for shareholders of a bank that performs poorly in the tests.

Stress tests are also a way for the big banks to prove that they have the ability to pay out higher dividends or initiate a share repurchasing program, without putting shareholders at risk. David discusses whether or not Bank of America could raise its famously low dividend after this round of tests, and when investors might see that change.

And finally, while shares of Zillow have had an impressive run recently and delivered stellar growth for investors last year, two key insiders among the company's top brass including CEO Spencer Rascoff are now selling off shares. Should investors be worried? As the old Wall Street adage says, while there is only one reason to buy, there are many possible reasons to sell a stock. David looks at why these two insiders might be selling, and tells investors he's not concerned.

David Hanson owns shares of Zillow. The Motley Fool recommends Bank of America and Zillow. The Motley Fool owns shares of Bank of America, Citigroup, and Zillow. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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