Banks That Fail 'Stress Test' Have 6 Months to Fix

By John Johnson,  Newser Staff
Posted Feb 25, 2009 9:40 PM CST
In this Nov. 25, 2008 file photo, pedestrians walk through New York's Times Square under a glowing Bank of America marquee.   (AP Photo/Craig Ruttle, file)
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(Newser) – The federal government has begun its so-called "stress tests" of the nation's big banks, reports the Los Angeles Times. The tests will run through April, and the banks will have to prove they can withstand a worsening economy—even if unemployment rises above 10% and home prices decline 22%. Banks that fail the test will have 6 months to raise private capital before being required to take government money—along with its conditions, Bloomberg notes.

“We wanted to bring a more consistent, more conservative, more forward-looking approach so that we help this cloud of uncertainty that’s hanging over our financial system that’s getting in the way of credit flowing again,” said Treasury chief Timothy Geithner. Officials would not speculate about how much more taxpayer money might be needed.