Stress Tests Reveal Big Banks Need $75B

Stress Tests Reveal Big Banks Need $75B - 5/7/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

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Stress Tests Reveal Big Banks Need $75B
Evan Weinberger

Securities Law 360. May 7, 2009
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EXCERPT: After the markets closed Thursday, federal authorities released the results of the Supervisory Capital Assessment Program, better-known as the stress tests on the 19 largest bank holding companies in the U.S., all with assets topping $100 billion. It looks like the patients are going to pull through, at least with close to another $75 billion. Of the 19 banks that underwent the tests, 10 will require an infusion of capital totaling $74.6 billion to meet regulators' increased Tier 1 capital — primarily common stock — standards, according to the U.S. Department of the Treasury, the Federal Reserve System and the Federal Deposit Insurance Corp. “Our government has taken extraordinary actions to ensure the stability of our banking system because this is essential to contain the risk of a worse recession and to lay the foundation for a sustainable recovery,” Treasury Secretary Timothy F. Geithner said in a statement. “With this support, and with the clarity provided by today's announcement, banks should be able to get back to the business of banking.” The highest total among the 19 financial giants is the $33.9 billion that Bank of America Corp. is being instructed to raise. Wells Fargo & Co. will have to raise $13.7 billion, lower than the widely reported $15 billion many thought the San Francisco-based bank would require. GMAC LLC, the lending arm of General Motors Corp., is going to have to add $11.5 billion, while Citigroup Inc. will require an infusion of $5.5 billion, according to the results. […] The stress tests were designed to determine the capital requirements the companies would need to survive in 2009 and 2010 under two scenarios for the current recession.

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