Big Losses Loom at Small Banks

Data will show potential losses in specific loan categories

(NEWSER) - The US will learn the fiscal health of its 19 biggest banks Thursday, when the Federal Reserve and Treasury release the results of the “stress tests,” the Wall Street Journal reports. Delayed somewhat, the results will contain potential loss estimates in specific loan categories for each bank, and aggregate data to give an overall picture of the banking system’s health. 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»

(NEWSER) - It's official: The stress-test results are out, and the feds say 10 of the nation's 19 biggest banks need to raise a total of $75 billion in capital to weather a future downturn, the Wall Street Journal reports. The banks, five of which are regional, are:

• Bank of America: $33.9 billion
• Wells Fargo: $13.7 billion
• GMAC LLC: $11.5 billion
• Citigroup: $5.5 billion
• Regions Financial Corp (Birmingham): $2.5 billion
• SunTrust Banks (Atlanta): $2.2 billion

Tests on the biggest banks will make raising capital, paying it back easier

(NEWSER) - In an op-ed piece in the New York Times today, Timothy Geithner positions the stress tests—whose results are released officially today—as a way to restore longer-term confidence in the aftermath of the "tentative stability" achieved by the last administration. "We chose a strategy to lift the fog of uncertainty over bank balance sheets and to help ensure that the major banks, individually and collectively, had the capital to continue lending even in a worse than expected recession." 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»