Days ahead of the release of the bank stress test results, reports have surfaced that Citigroup (NYSE: C) may attempt to raise capital from private investors rather than take more U.S. bailout funds. Such a move could strengthen the firm's equity without giving the government more control.

Although the results of the test haven't been released, it is widely known that Citigroup is considered one of the banks that will need to raise cash to continue (some reports state more than $10 billion).

We hear the name of Barney Frank quite often. He is Chairman of the House Financial Services Committee. His latest mantra is for more transparency in the recent bank "stress tests."

What is so hard to believe is how naive Barney Frank really is. Doesn't he know that we have an underground banking system that regulators do not even touch. The underground banking system is comprised of all the "off-the-books" transactions like CDSs, CDOs, CLOs and all means of convoluted deals that are losing money and do not even show up on "stress tests." For example, JP Morgan Chase & Co. (NYSE: JPM) is holding $87.7 trillion worth of CDSs somewhere off the books.

The New York Times reports that the White House will publicly disclose the results of the stress tests of the 19 biggest banks in the country.

The obvious reason for not disclosing the results of the stress test is the fear that it could lead to a self-fulfilling prophesy: Banks deemed to be poorly positioned for a prolonged economic downturn will experience withdrawals, fleeing employees and less access to credit, making them more likely to fail -- or at least threatening their ability to compete.

First of all, let me say that Federal law prohibits the disclosure of all bank "stress tests" and bank examinations, so everything said here is pure hearsay.

Nevertheless, we have some good news: Banks are holding up well under Federal examination. All 19 banks will pass their stress tests. The bad news is that they still may need additional taxpayer money.