Dennis Seid 5/7/09
Ten big banks need $75B more
* Stress tests suggest the financial system is healing.
By DANIEL WAGNER and JEANNINE AVERSA
The Associated Press
WASHINGTON -The government’s long-awaited “stress-test” results have found that 10 of the nation’s 19 largest banks need a total of about $75 billion in new capital to withstand losses if the recession worsened.
The Federal Reserve’s findings, released Thursday, show the financial system, like the overall economy, is healing but not yet healed.
Some of the largest banks are stable, the tests found. But others need billions more in capital – a signal by regulators that the industry is vulnerable but viable. Government officials have said a stronger banking system is needed for an economic rebound.
Officials hope the tests will restore investors’ confidence that not all banks are weak, and that even those that are can be strengthened. They have said none of the banks will be allowed to fail.
The banks that need more capital will have until June 8 to develop a plan and have it approved by their regulators.
Among the 10 firms that need to raise more capital, the tests said Bank of America Corp. needs by far the most: $33.9 billion. Wells Fargo amp& Co. requires $13.7 billion, GMAC LLC $11.5 billion and Citigroup Inc. $5.5 billion.
Regions Financial Corp. needs to raise $2.5 billion.
The tests found that if the recession were to worsen, losses at the 19 stress-tested firms during 2009 and 2010 could total $600 billion.