Banks Get Stress Test Grades

(NEWSER) - In the wake of reports that complaining banks cajoled the Federal Reserve into sweetening some stress test results, the Wall Street Journal looks at the hard numbers. Citigroup, for example, was originally supposed to raise $35 billion; the number eventually released was $5.5 billion. The total for Bank of America, meanwhile, shrank from more than $50 billion to $33.9 billion. More»

Investors find causes for optimism in capitalization news

(NEWSER) - Leaked results of the stress tests on America's biggest banks separate sufficiently capitalized banks—including JPMorgan Chase, MetLife, AmEx, and Goldman Sachs—from underfunded ones such as BofA, Wells Fargo, and Citi. Bank shares rose sharply yesterday and today, and some investors said the results were better than they feared. The Wall Street Journal writes that weak banks might have trouble enticing the private investors they'll need, while the New York Times is more optimistic, saying "the big bailouts for the banks may be over." More»

Will issue $17B in common stock to meet capital requirements

(NEWSER) - Citigroup and the US government have reached a deal that will allow the bank to repay $20 billion in TARP loans, after weeks of wrangling over the bank's health. Citi will raise $20.5 billion, $17 billion of it in common stock, the company said in a statement, a sign that the government's still worried about its cash reserves. At the same time, the government will sell $5 billion of the Citi common stock it currently holds, with the remainder of its 35% stake gradually sold off within the next 6-12 months. More»

But Fed chief is encouraged by bank response

(NEWSER) - Big banks' response to "stress tests" has been encouraging but they will need to watch out for risks not covered by the tests, Ben Bernanke warned regulators yesterday. The Fed chief—signaling that investment giants like Goldman Sachs can expect tighter scrutiny—said banks should self-test for potentially disastrous "operational, liquidity and reputational risks," Bloomberg reports. Bernanke warned that the financial situation remained fragile, and that the government was prepared to inject more capital to shore up the system. More»

Fed massaged some figures to portray banks as healthy

(NEWSER) - Some major banks managed to cajole the government into using more optimistic figures in its "stress test" results, insiders tell the Washington Post. Banks like Citigroup—eager to show they were healthy and didn't need more help from the government—were given credit for pending moves to raise capital, resulting in the report showing shortages of capital well below what many experts had predicted. More»